Are there any macro‑economic or commodity price factors (e.g., lumber prices, interest rates) that could further influence Conifex's performance?
Macro‑economic and commodity backdrop
Conif ( TSX:CFF) is now reporting a swing to a $3.2 MM negative EBITDA and an $8.3 MM net loss after a modest profit in the prior quarter. The company’s cash‑flow profile is therefore highly sensitive to the two primary external levers that drive timber‑sector earnings: lumber prices and interest‑rate dynamics.
Lumber‑price environment – Canadian soft‑wood prices have been trending lower since mid‑2023 on the back of a softening US housing market, higher inventory levels, and a modest decline in construction activity. The U.S. Housing Starts index is down ~12 % YoY and the NAHB Housing Index has been sub‑50 for the past six months, indicating under‑capacity demand. If the price of soft‑wood lumber (e.g., 2‑x‑4 2‑×‑4) stays below the $400‑$450 / 100 bd range, Conifex’s margin will remain compressed, especially given its current cost structure. Conversely, any up‑turn in housing starts, a supply‑chain bottleneck, or a trade‑policy shift that curtails imports could lift lumber prices 10‑15 % and provide a quick earnings boost.
Interest‑rate outlook – The Bank of Canada and the Fed are still in a tightening cycle (policy rates around 5 % and 5.25 % respectively). Higher rates raise financing costs for both Conifex (its debt‑heavy balance sheet) and its downstream customers (homebuilders, developers). A sustained high‑rate environment depresses new‑build activity, further weakening lumber demand. However, the market is pricing in a potential rate‑peak by Q4‑2025, after which a moderate easing could revive construction financing and, by extension, timber demand. Until that easing materialises, the interest‑rate headwind will continue to pressure Conifex’s cash‑generation.
Trading implications
- Short‑to‑medium‑term bias: With earnings already in the red, a down‑trend in lumber prices and a high‑rate backdrop keep the stock vulnerable. Technicals likely show a broken trendline and oversold momentum (RSI < 30 on the daily chart). A tight stop‑loss around the recent low (≈ C$0.85) is prudent if you choose a short position.
- Long‑term upside catalyst: Watch for lumber‑price rebounds (≥ 10 % above current levels) and any forward‑guidance from the Bank of Canada indicating a rate‑cut path. If both occur, the fundamentals could improve enough to justify a re‑entry on pull‑backs—targeting a 15‑20 % upside from current levels, with a stop set just above the 20‑day moving average.
Actionable watch‑list:
- U.S. Housing Starts / NAHB Index (weekly) – a sustained rise > 5 % could be the first sign of demand recovery.
- Soft‑wood lumber price (CME/NYMEX) – break above $450/100 bd is a bullish signal for Conifex margins.
- Bank of Canada & Fed rate decisions – any dovish language in the next 2‑3 meetings should be factored into a short‑to‑medium‑term position adjustment.
In short, lumber price dynamics and the trajectory of North‑American interest rates are the dominant macro levers that will dictate Conifex’s next price move. Until those factors turn decisively positive, the stock remains skewed toward the downside.