Lumber stocks are publicly traded companies that cut, process, market, and sell wood products. These stocks have seen some immense growth over the last two-and-a-half years, fuelled by Canada’s insatiable appetite for homes and the world’s push for more sustainable construction projects.
For investors looking to profit off Canada’s immense demand for timber and housing, lumber stocks can be an attractive alternative to full-on real estate investing.
Let’s delve into these hot stocks and see if they’re right for your holdings.
Related: List of stocks in the TSX materials sector
What are lumber stocks?
Simply put, lumber stocks are companies whose main products are wood or wood pulp. A sawmill company that cuts and sells 2x4s, for instance, is a lumber stock, as is a company that makes paper reams and cardboard packaging boxes.
While the companies in this market sector are incredibly diverse, they typically fall into one of these categories:
- Roundwood companies produce wood in “log” form, such as poles, posts, and girders (think utility poles used to connect telephone wires).
- Sawn wood companies saw wood in different dimensions and forms for use in home building, furniture making, and home renovations.
- Pulp and paper companies make paper and cardboard products from wood pulp.
Top Canadian lumber stocks
Canada is the second largest producer of wood in the world, with wood exports making up $17 billion in annual sales. As such, the Toronto Stock Exchange (TSX) has some of the largest lumber companies, including the following three:
| Lumber Stocks | Description |
| West Fraser Timber (TSX:WFG) | Vancouver-based wood company that manufactures and sells lumber |
| Canfor (TSX:CFP) | Softwood lumber and pulp company with operations across Canada |
| Stella Jones (TSX:SJ) | Lumber producer that makes utility poles and lumber used in home building |
1. West Fraser Timber
Based in Vancouver, West Fraser is one of Canada’s largest and most diversified lumber companies.
Indeed, this company is involved in almost every aspect of lumber production and manufacturing, including engineered wood products (such as particleboard and plywood), wood pulp, wood chips, newsprint, paper, tissue, cardboard, and box materials, just to name a few.
In 2021, West Fraser acquired another Canadian timber company, Norbord, which has now helped it become the world’s largest producer of oriented strand board. Most recently in November 2023, West Fraser completed the acquisition of Spray Lake Sawmills in Cochrane, Alberta.
In 2023, West Fraser Timber reported stronger financial performance compared to 2024. While the company generated $1.705 billion in revenue in Q2 2024, it declined to $1.437 billion in Q3. Additionally, net income turned into a net loss of $83 million in Q3 2024, following a profit of $105 million in Q2.
Market challenges in 2024, including weak lumber demand and high fiber costs, led to the indefinite curtailment of the Lake Butler sawmill, reducing U.S. lumber capacity by 110 million board feet. Despite these setbacks, the company’s Relative Strength Rating improved in late 2024, showing some resilience in stock performance. West Fraser is expected to release its full-year 2024 results in early 2025, which will provide further clarity on its year-over-year performance.
2. Canfor
Another lumber company hailing from Vancouver, Canfor is North America’s leader in integrated forest products. Its main products include softwood lumber, engineered wood products, and specialty wood. Canfor is also the world’s largest producer of sustainable lumber, with stakes in both green energy and green pellets.
Canfor has lumber mills in British Columbia, Alberta, and the Southeastern United States. It’s also made numerous strategic acquisitions, such as its recent purchase of Millar Western Forest Products.
In 2023, the company faced a significant operating loss of $532 million and a shareholder net loss of $326 million, with the losses exacerbating in the fourth quarter. In 2024, the company’s financial challenges deepened. The second quarter recorded an operating loss of $250.8 million, which further escalated to $559.7 million in the third quarter.
Despite these challenges, the company’s operations in Europe and the US South performed solidly, contrasting with the ongoing difficulties in British Columbia. The year was also marked by the successful implementation of a capital growth program in the US South.
However, global lumber market conditions remained difficult, with prices and demand contributing to declining results across all lumber regions, particularly in Western Canada. The fourth quarter saw a moderate improvement in global pulp market fundamentals, evidenced by a slight increase in demand and a 20% boost in pulp production.
3. Stella Jones
Stella Jones is another Canadian lumber giant that focuses on two segments: pressure-treated wood (such as utility poles, residential lumber, and railroad ties) and logs and lumber (lumber for home-building projects).
Stella Jones has been profitable for 20 straight years. The company is also a dividend knight (the only one in the industry), and it has raised its payout for 20 consecutive years.
Stella-Jones reported third-quarter 2024 sales of $915 million, down from $949 million in the same period last year. Operating income decreased to $130 million from $166 million year-over-year, while EBITDA was $162 million with a 17.7% margin. Net income for the quarter was $80 million or $1.42 per share.
The company updated its financial objectives, projecting sales of approximately $3.6 billion by 2025 and an EBITDA margin exceeding 17%. Despite lower sales in the third quarter, Stella-Jones maintains a solid financial position with $342 million available under its credit facilities.
Investing in foreign lumber markets
Though you can find plenty of exciting lumber stocks within Canada, you might also want to look down south to the U.S. to diversify your holdings. For those interested in international stocks, here are three U.S. lumber companies you might want to consider.
| Lumber Stocks | Description |
| International Paper | Major producer of paper products, such as Hammermill, Williamsburg, and Springhill |
| Boise Cascade | Manufacturer of wood products and building materials used to construct homes |
| Resolute Forest Products | Diversified lumber company with a wide range of products, such as newsprint, commercial paper, and timber |
Are lumber stocks right for you?
The good thing about timber is that it plays an essential role in home building and furniture making. As long as demand for these remains high, lumber stocks can present investors with immense upward gains.
The Canadian lumber industry experienced a significant boom in 2018, reaching a record high of $582 per thousand board feet. This surge, coupled with the even more substantial bull run from late 2020 to mid-2022, fuels expectations for continued growth in lumber stocks. The dramatic price increase between these two peak periods—a 193% jump—underscores the industry’s potential.
However, it’s crucial to acknowledge the inherent volatility of lumber prices. While they may remain elevated for a time, they are not guaranteed to continue rising, and periods of decline are inevitable. Indeed, recent indicators suggest a complex market: lumber production in August 2024 was down 9.9% compared to August 2023, and prices have fluctuated throughout 2024, influenced by factors like the US housing market and potential tariff changes. This price volatility, exemplified by late 2024 price decreases compared to the previous month yet increases compared to the previous year, creates challenges for producers in forecasting and planning.
Like other commodities, this industry is extremely cyclical, with most of its upward growth tied to the housing market. When the demand for houses slows down, timber prices will likely fall and lumber companies could experience revenue losses as a result.
Surging demand is also over-stressing lumber companies. Many mills have such a long backlog of orders; they’ve simply produced more lumber than they can safely store. Some mills have even had to close temporarily, as they’ve accumulated an unsustainable level of inventory.
As if that wasn’t hard enough, railway cars—the primary transportation network for timber—have also stalled the supply chain, as they can’t transport enough supply to keep up with raging demand.
That’s not bad news. Strong demand means the timber industry can continue jacking up prices. But it’s certainly something investors should pay close attention to, as the market could become too frothy with the end result being a deflation in timber prices—and consequently lumber stocks.