By Stephen Nakrosis

Key trends that have served as positive drivers in recent years are expected to continue to support medium- and longer-term demand for new home construction in North America, West Fraser Timber said.

"Over the medium term, improved housing affordability from stabilization of inflation and interest rates, a large cohort of the population entering the typical home buying stage, and an aging U.S. housing stock are expected to drive new home construction and repair and renovation spending," which will support lumber, plywood and oriented strand board demand, the company said.

At the same time, the company's president and chief executive, Sean McLaren, said demand uncertainty for wood building products persists in the face of ongoing housing affordability challenges, a problem magnified by a U.S. administration's that has threatened and imposed higher lumber duties and punitive tariffs.

On North American outlook:

The company said the most significant uses for its North American lumber, oriented strand board and engineered wood panel products are residential construction, repair and remodelling and industrial applications.

"Over the longer term, growing market penetration of mass timber in industrial and commercial applications is also expected to become a more significant source of demand growth for wood building products in North America," according to the company.

"While there are near-term uncertainties for new home construction, owing in large part to the level and rate of change of mortgage rates and the resulting impact on housing affordability, unemployment remains relatively low in the U.S.," West Fraser said.

Further, the U.S. central bank has cut rates a total of 100 bps since September, and federal funds futures indicate prospects for additional rate cuts in the middle of this year, according to the company. It added "there are evolving risks related to the U.S. administration's tariff and other policies, which could be inflationary and could impact this trend in rates."

West Fraser also said demand for new home construction and wood building products may decline in the near term if the broader economy and employment slow, or if trends in interest and mortgage rates negatively impact consumer sentiment and housing affordability.

On Europe, U.K. outlook:

West Fraser said it expects challenging markets to persist over the near term in Europe and the U.K.

"Looking further out, we continue to expect demand for our European products will grow over the longer term as use of OSB as an alternative to plywood grows. An aging housing stock is also expected to support long-term repair and renovation spending and additional demand for our wood building products," the company said.

Inflation appears to have stabilized and interest rates have begun to decline, which is directionally positive for housing demand, according to West Fraser.

"That said, ongoing geopolitical developments, including the potential price inflation of U.S. tariffs on the U.K. and Europe, may adversely impact near-term demand for our panel products in the region," the company added.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com

(END) Dow Jones Newswires

April 22, 2025 18:37 ET (22:37 GMT)

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