Packaging Corp of America joins WestRock and Cascades in announcing containerboard curtailment

PCA’s temporary closure of its Wallula mill is the third US containerboard capacity closure announced in 10 days

A third containerboard machine curtailment occurred in the US this week with Packaging Corp of America (PCA) temporarily shutting its 560,000 tons/yr Wallula, WA, mill until later this year.

The week before PCA’s announcement, WestRock said it would permanently close down its North Charleston, SC, unbleached kraft linerboard and packaging board mill with 320,000 tons/yr of kraft linerboard capacity on Aug. 31, while Cascades announced it’s shutting a smaller 90,000 tons/yr No. 2 corrugating medium machine in Niagara Falls, NY. The Cascades PM No. 2 has been down since November 2022.

The North Charleston and Niagara Falls machine shuts are permanent, the PCA Wallula shut is not.

PCA said the shut was for “economic conditions,” the Tri-City Herald in Washington state reported.

“We expect to resume operations at the mill later this year,” the PCA statement to the local newspaper said. The company said that their corrugated converting facilities in Richland and Wallula in Washington are unaffected and remain open.

A report to Fastmarkets’ PPI Pulp & Paper Week at the end of April told of the potential Wallula mill shutdown, as the company reportedly halted softwood chip purchases indefinitely on Apr. 1 for linerboard production. At the same time, corrugating medium production was said to continue using old corrugated containers (OCC) and sawdust pulp.

The PCA Wallula shut seems to suggest that demand remains weak, so maybe the reported box demand improvement or pickup in April has not been that strong.

Market contact

On earnings calls with analysts, major containerboard/box integrateds International Paper (IP), WestRock, and PCA reported improved box shipments in April, from a weak shipment month in March. First-quarter US actual box shipments declined by 8.5% on a year-over-year basis and even more so for some of the largest integrateds. IP shipments in the quarter were down 8.5% year-over-year, while WestRock shipments dropped 9.4%, and PCA’s were down by 12.7%.

Domestic price pressure is back

These latest capacity shutdowns also occurred as some contacts reported to P&PW that linerboard prices domestically on the open market in North America were under pressure again this week. This comes after linerboard pricing, first, increased by $220/ton in 17 months from November 2020 through March 2023, then declined by $70/ton for 42-lb unbleached kraft linerboard on the open market in North America from November 2022 through February 2023, according to P&PW’s pricing survey.

P&PW reports linerboard pricing both for the domestic market in North America and for export unbleached kraft linerboard on May 19. See Fastmarkets prices here.

A lot of mills are offering paper because of the new capacity starting up, so a producer has to be flexible on price to avoid losing business.

Linerboard buyer and seller

Four capacity-additions PMs now running

As of this week, four capacity addition machines were now running in North America with a total of almost two million tons of annual capacity, which amounts to about a 5% capacity add. Domtar, Atlantic Packaging, Cascades and ND Paper started their new and converted recycled containerboard units.

These start as North American boxmakers are unclear about the ongoing demand for their boxes. One national boxmaker told P&PW, likely in an understated tone, that customers were “cautious.”

Asked if corrugated box demand might rise in the next 30 to 60 days following an improved April shipment month, compared to a low-shipment March, the contact said: “Demand is a little better. But I have no clue what will happen in 60 to 90 days. It is (a hard call). We’re revisiting our budgets now.”

Mills have since been taking large amounts of downtime to try to balance their supply with the weaker demand conditions. According to market contacts, this all started last September when North American market supply and demand were dramatically uneven. Destocking along the supply chain slowed down business for containerboard and corrugated boxes.

2.7 million tons of economic downtime in the last 3 quarters

“In aggregate, International Paper (IP, Hold), (WestRock), and (PCA) took (~796,000 tons) of economic downtime in 1Q23 following (~1.1million tons) in 4Q and (~814,000 tons) in 3Q,” Truist Securities analyst Michael Roxland reported this week in an investors note.

PCA’s Wallula “announcement (this week) is indicative that conditions remain somewhat challenging and that it is managing its order book and focused on maintaining price (our take). We view the current closure as a way for (PCA) to further balance supply and demand, and minimize any potential future price erosion,” Roxland told investors on May 10.

The 2.71 million tons of downtime from IP, WestRock, and PCA represents 8% of North American containerboard capacity for three quarters, based on a P&PW estimate. On average, US mills operated at 85.0% of capacity during those three quarters.

Want to learn more about the containerboard market? Take a look at our global and European containerboard short-term outlook here. Speak to our team to find out more about subscribing to PPI Pulp & Paper Week or our forecasts.

Case Study

Learn how to monitor packaging prices using cost and price indices and understand the underlying cost drivers, from material cost to labor, energy and more. Examples include cartonboard, liquid container and paper bag.

What to read next
This consultation, which is open until May 16, 2024, seeks to ensure that our methodologies continue to reflect the physical graphic paper market, in compliance with the International Organization of Securities Commissions’ (IOSCO) Principles for Price Reporting Agencies (PRAs). This includes all elements of our pricing process, our price specifications and publication frequency. Fastmarkets FOEX […]
Andy Farida, Fastmarkets base metals research analyst, looks at the effect of the US elections on US aluminium prices
With the recent launch of US/Canada lithium prices, Fastmarkets explores the motivation for the introduction and the reasons why this is an important development for the North American market
Prices for old corrugated containers (OCC) in Mexico were unchanged in April, with imported grades remaining stable month over month for the first time this year, Fastmarkets has learned. Prices for imported OCC held at $120-130 per ton. The firm pricing follows $10-per-ton increases in March and January as well as a $15-per-ton rise in February. […]
After reporting weak export volumes throughout 2023 as a result of the economic recession affecting important global markets, the latest food export statistics from Latin American countries are bringing relief for corrugated packaging producers in the region, sources told Fastmarkets. Interested in the latest developments and trends in the paper packaging industry? Speak to our team […]
Prices for some containerboard produced in the Gulf Cooperation Council (GCC) countries moved north once again in March. Manufacturers have been pushing prices up throughout the first quarter on the back of limited supply, following logistical difficulties owing to the Red Sea shipping crisis, and improved demand ahead of and during Ramadan. Want to know […]