[Special Stock] Seongchang Enterprise, US Housing Construction 'Boom' Triples Lumber Prices... Forest Land and Afforestation Value at 450 Billion Won

[Asia Economy Reporter Hyungsoo Park] Seongchang Enterprise Holdings is showing strong performance. The continued rise in lumber prices appears to have influenced the stock price.

As of 11:57 AM on the 27th, Seongchang Enterprise Holdings is trading at 2,920 KRW, up 8.74% from the previous day.

On the 25th (local time), lumber prices soared to an all-time high. At the Chicago Mercantile Exchange (CME) in the United States, May lumber futures traded at $1,372.50 per 1,000 board feet (bf) on the 23rd, setting a new record. Lumber futures prices have tripled since June last year and risen 57.2% just this year.

The number of home sales in the U.S. is at its highest level since 2006, just before the real estate bubble burst. Experts cite the recent boom in private home construction and the sharp rise in real estate prices in the U.S. as causes for the increase in lumber prices. Recently, U.S. home sales have reached their highest level since 2006, the year immediately preceding the subprime mortgage crisis that triggered the global financial crisis.

Inflation was already anticipated. In March, the U.S. Consumer Price Index rose 0.6% from February, marking the fastest increase in nearly 10 years. JP Morgan pointed out that reflation tendencies appear to be spreading more broadly, with core service prices accelerating as the U.S. economy reopens. Last week, lumber prices hit an all-time high after rising nearly 60% since the beginning of the year.

Copper, aluminum, and Brent crude oil have each risen more than 20% since January, putting upward pressure on inflation. Last month, the Federation of Korean Industries reported that 76% of its member companies identified raw material price increases as their biggest challenge in 2021, according to the Financial Times.

Seongchang Enterprise Holdings has subsidiaries including Seongchang Enterprise Co., Ltd., a manufacturer and seller of plywood and flooring boards; Seongchang Board Co., Ltd., a manufacturer and seller of particleboard; GC Tech Co., Ltd., a company specializing in processing and selling recycled wood; and GC Global Co., Ltd., a company specializing in the sales, distribution, and import/export of wood products.

On January 11, 2016, in accordance with K-IFRS (Korean International Financial Reporting Standards), to reflect the fair value of tangible assets and improve financial structure through asset and capital increases, asset revaluation was conducted on land, forests, afforestation, and ornamental plants. The revaluation surplus for these assets amounted to 264.3 billion KRW. The value of land, forests, and afforestation was found to exceed 450 billion KRW.

The plywood market has recently seen price increases in imported plywood due to container shortages for Korea and raw material shortages caused by the COVID-19 pandemic. This is expected to have a positive impact on Seongchang Enterprise’s product sales. Seongchang Enterprise plans to continuously expand its market share through excellent product quality and diverse product development, while making every effort to improve profitability by focusing on cost reduction and risk management with its sales channels.

As part of quality improvement efforts, on October 22, 2009, Seongchang Enterprise obtained FSC CoC certification from the Forest Stewardship Council (FSC), a globally recognized forest certification organization, for plywood products made from New Zealand lumber. FSC CoC certification recognizes that the products are environmentally friendly, manufactured and processed using wood obtained through legal afforestation and logging processes. The company also received JAS certification in December 2011, acknowledging the excellence of its products.

The particleboard industry can be considered an eco-friendly recycling industry using waste wood. It produces wood by recycling scraps left from lumber production, crushing them finely, spraying adhesive resin, and pressing them under high temperature and pressure. As resource procurement issues have become significant, this industry is gaining attention as a recycling industry for waste wood.