Resolute wood going faster than they can cut

Lumber demand is so strong that Resolute Forest Products Inc.’s order book exceeds its inventory, according to CEO Remi Lalonde.

After trucking and railcar shortages hampered shipments during the first quarter, Resolute is now holding extra inventories at a time of record wood prices, Lalonde said during a conference call Thursday. Still, even those stockpiles aren’t enough to satisfy the North American building boom, so Resolute is ramping up output. Fullyear production is expected to rise by seven per cent.

Lumber futures have surged 85 per cent this year on sky-high demand from homebuilders and remodellers. The price touched a record high of US$1,334.60 per thousand board feet two days ago and on Thursday surged by the US$32 maximum allowed under Chicago Mercantile Exchange rules.

“We’re selling volume that we haven’t sawed yet,” the CEO said. The inventory rise during a price rally was “kind of a happy accident.”

Investors punished Montreal-based Resolute for posting adjusted per-share profit that trailed every analyst estimate compiled by Bloomberg. Executives cited transport snags for the underperformance. The stock plunged as much as 17 per cent.

To boost output, Resolute restarted an Ontario mill idle for two years, as well as one in Arkansas. Before Thursday, Resolute shares had more than doubled in a year, pushing the firm’s valuation to more than US$1 billion. Resolute closed 15.5-per-cent down at $16.12 in Toronto.

Also on Thursday, Canfor Corp. said first-quarter lumber shipments were seven-per-cent below the prior three-month period. The firm blamed severe winter weather in the U.S. South that disrupted deliveries, as well as transportation constraints in Canada.

Still, the lumber rally and improved global pulp-market conditions meant it reaped record operating income of $603 million, compared with an $88.8-million loss a year earlier.