[Special Stock] Igeon Industry, US Housing Shortage Drives Lumber Surge... Chile Subsidiary Doubles Last Year's Net Profit in 3 Months

[Asia Economy Reporter Hyunseok Yoo] Igeon Industry is showing strong performance. Among the raw materials whose prices have broadly increased, one of the most noticeable in terms of recent price surge speed is lumber, which appears to have influenced the stock price.

As of 10:15 AM on the 17th, Igeon Industry was trading at 16,350 KRW, up 14.74% (2,100 KRW) compared to the previous trading day.

Researcher Byunghyun Cho of Yuanta Securities explained, "Among general industrial raw materials, lumber is not usually a focus of interest," but added, "In terms of price increase rate this year, lumber is showing a clearly outstanding performance."

He continued, "At the end of last year, CME lumber futures prices were moving in the mid-to-high $800 range per 1,000 bft, but in about five months, they have risen to the $1,600 range," adding, "On the 7th, it reached $1,670, setting a new historical high."

He interpreted the sharp rise in lumber prices as a result of various combined price-increasing factors, emphasizing, "The broad asset price inflation pressure provided by the massive liquidity supplied after COVID-19 likely also affected lumber."

Furthermore, he analyzed, "Direct demand and supply factors contributing to price increases are pointed out from various perspectives," noting, "Operational halts or restrictions in major forestry regions due to the spread of COVID-19, as well as the impact of large-scale wildfires?including California's, which was the third largest on record last year?and wildfires in major forest areas such as Siberia and Australia, have also played a role."

Researcher Cho added, "Recently, the expansion of forest carbon offset systems as part of environmental policies has also influenced the market," and explained, "From the demand side, the strong U.S. housing market is a factor driving lumber prices upward."

He said, "One of the representative indicators used to assess housing market inventory capacity is the months of housing supply," and noted, "As of March, this data is estimated at 3.6 months, which is close to an all-time low."

Researcher Cho judged that the insufficient housing inventory underscores the need for new supply and tends to clearly lead to increased construction demand.

Researcher Giryong Kim of Yuanta Securities predicted, "Igeon Industry's performance will improve due to the results of Eagon Lautaro S.A (hereafter ELA), a plywood manufacturing and sales corporation in Chile." He emphasized, "In the first quarter of this year, the Chilean corporation (ELA) operating profit exceeded last year's annual results," adding, "Net profit achieved about twice last year's performance." He analyzed that this was due to strong domestic sales in Chile (40%) and the U.S. (15%~20%), which account for over 50% of total sales, as well as the effect of price increases.