Packaging Corporation of America has confirmed that it will permanently shut down the No. 2 paper machine (W2) and kraft pulping facilities at its Wallula, WA containerboard mill. PCA will continue to operate the No. 3 paper machine (W3) and recycled pulping facilities at the mill.
After the announced actions, which are expected to be completed by the end of the first quarter 2026, the mill will have capacity to produce 285,000 tons per year of high-performance recycled linerboard and corrugating medium on the W3 machine, which is a reduction of 250,000 tons of annual production capacity at the mill.
The W2 machine has approximately 140,000 tons of annual capacity to produce corrugating medium and has been idled since May 2025. The mill is expected to produce approximately 400,000 tons of containerboard this year. The new configuration is expected to lower the production cost at the mill by approximately $125 per ton from 2025 levels due to an improved cost structure and utilization rate. The 250,000 tons of reduced capacity will be replaced with production enhancements at other PCA mills beginning in the fourth quarter of 2026.
These actions are estimated to result in pre-tax restructuring charges of approximately $205m, substantially all of which will be recorded in the fourth quarter of 2025 and first quarter of 2026. These charges include approximately $165m of non-cash impairment and accelerated depreciation charges and $40m of cash charges for contract termination, severance and other charges. PCA expect a reduction in headcount of approximately 200 positions.
Mark Kowlzan, Chairman and CEO, said, “We recognize the impact of decisions like this on our employees and will provide support through this process. We greatly appreciate their efforts and our decision is not a reflection on their performance. We are taking these steps to support the future viability of the mill and improve our efficiency and cost position, while continuing to invest in our future growth.
“We face a challenging and worsening cost environment at the Wallula mill. Wood fiber and purchased power costs are by far the highest in our system, making the currently configured mill no longer competitive. By operating as a single-machine, recycled mill, we will streamline operations at the facility and significantly lower our cost of production, while continuing to produce high quality containerboard for our plants and customers. We have significantly invested in the W3 machine and its capabilities after we converted it to containerboard in 2018. Moving some production to lower-cost PCA facilities where we are investing in production improvements will further optimize our mill system, resulting in even greater efficiencies.”
Tom Hassfurther, President, added, “We remain committed to growing with our customers and will have sufficient containerboard capacity to do so. We have approximately 140,000 tons per year of high-performance, low-cost, lightweight linerboard capacity scheduled to come up at our Jackson mill in the fourth quarter 2026 under previously approved projects that are in progress. Additional improvements at the acquired Greif facilities and at our Counce mill will replace the remaining capacity as and when required by our customers.”
