CUT Overview

Production Disruptions: Graphic Packaging Holding Company has faced production reductions due to severe weather and an electrical failure at its facilities, leading to a lowered adjusted EBITDA outlook for Q3 2024 by $20 million to $25 million.

Financial Performance: The company anticipates full-year 2024 results will fall below previous forecasts, with second-quarter adjusted EPS beating estimates but sales missing expectations.

Lumber Futures Performance: The CME's physical lumber futures contract saw a significant decline of 22.99% in Q2 and 21.24% in the first half of 2024, closing at $450.50 per 1,000 board feet, with potential for further price drops despite some recent increases.

Interest Rates and Seasonal Trends: The likelihood of a Fed interest rate cut could positively impact lumber prices, but seasonal trends suggest that any recovery in demand may not materialize until spring 2025, keeping prices within a static range for the remainder of 2024.

Lumber Futures Market Trends:

• Lumber futures market is in a bearish trend in May 2024.
• The market is influenced by the Fed's monetary policy path.
• Trading ranges have narrowed, signaling consolidation.
• Low liquidity in lumber futures can lead to extreme price swings.
• Interest rates play a significant role in determining lumber prices.

Market Analysis:

• Nearby July physical lumber futures are at $538.50 per 1,000 board feet.
• Lumber has been stuck in a sideways range between $500 to $550.
• Lumber remains illiquid, leading to challenging trading dynamics.
• Alternative assets like WY, WOOD, and CUT offer more liquidity.
• Potential for explosive price action when lumber prices move.