JPMorgan's Phil Gresh says that the spread divergence between Hardwood and Softwood pulp pricing...

|By:, SA News Editor

JPMorgan's Phil Gresh says that the spread divergence between Hardwood and Softwood pulp pricing and inventories has created a trading opportunity, and he's recommending take advantage with a pairs trade in the pulp wood space. He recommends investors go long Domtar ([[UFS] +1%) and short Fibria Celulose (FBR -4%). FBR has outperformed UFS by 24% YTD and 52% since early July.  Gresh notes that mills currently have an incentive to increase hardwood production, which would bring pricing spreads back to historically average levels.