At dawn on December 3, 2025, the steady rumble of machinery at the Wallula, Washington, mill ground to a halt, signaling the end of an industrial chapter. Packaging Corporation of America announced a major restructuring, cutting 200 jobs and booking a $205 million charge as it shutters key operations amid unrelenting industry pressures.
Industry Under Pressure
The North American containerboard sector lost 10% of its fiber capacity in 2025, driven by weak demand and mill closures, with no rebound anticipated before 2027. High-cost facilities like Wallula struggle against more efficient rivals, forcing operators into tough choices to survive the downturn. This action fits a pattern of reductions across North American containerboard, marking the sector’s third straight year of decline in 2025. Packaging Corporation of America has shuttered other high-cost mills in Pennsylvania, North Carolina, and Georgia to hone efficiency. In July 2025, it acquired Greif’s containerboard business for $1.8 billion to bolster capacity elsewhere and fuel expansion.
Wallula’s Cost Crisis
For decades, the Wallula mill anchored production along the Columbia River, becoming a major employer and economic driver. Acquired by Packaging Corporation of America in 2013, it bolstered the company’s status as a top containerboard producer. Now, its partial closure closes a long era, reshaping the site’s role in regional manufacturing.
Over the past two years, surging raw material and energy prices repeatedly idled the mill. Its expenses exceeded industry averages by $125 per ton, rendering operations untenable despite cost-cutting attempts. CEO Mark Kowlzan described the site’s cost structure as unsustainable, pushing the firm toward reconfiguration for viability. Packaging Corporation of America’s third-quarter results in 2025 fell short of forecasts, hampered by sagging orders and climbing raw material expenses.
The Shutdown
The company will cease No. 2 paper machine and kraft pulping operations, retaining only the No. 3 paper machine and recycled pulping. Completion is set for the first quarter of 2026, eliminating about 200 positions and incurring $205 million in charges—$165 million non-cash for impairments and depreciation, plus $40 million for severance and related costs. This equates to over $1 million per affected worker in total expenses.
Kowlzan positioned the closure as essential for enduring competitiveness amid a “challenging and worsening cost environment.” The strategy sheds inefficient assets while channeling resources into modern, lower-cost operations. Such shifts, though painful, aim to position the company for recovery as market dynamics evolve.
Community Impact
Wallula, a small community, faces deep economic tremors as the mill—one of its biggest employers—slashes output from a projected 400,000 tons of containerboard in 2025 to half that level. Suppliers, contractors, and nearby businesses reliant on the plant brace for reduced activity, potentially unsettling local stability. The annual capacity drop stands at 250,000 tons.
Packaging Corporation of America commits to severance and transition aid for those impacted, with Kowlzan stressing the move stems from market conditions, not employee performance. Still, the layoffs will touch roughly 200 families by March 2026, straining a tight-knit area long tied to the mill’s fortunes.
Moving Forward
To offset losses, the company will ramp up output at other sites, such as its Jackson, Alabama, mill. By the fourth quarter of 2026, it aims to restore much of the volume through 140,000 tons of new lightweight linerboard production. The reconfigured Wallula will run as a single-machine recycled mill, trimming costs by $125 per ton and streamlining processes, though at lower overall capacity.
As Packaging Corporation of America navigates these cuts, the containerboard industry’s slow thaw raises questions about sustainability. Full replacement of lost output by late 2026 offers short-term relief, but persistent weak demand could spur more consolidations, testing communities and firms alike in the years ahead.
Source:
Packaging Corporation of America Press Release (Business Wire); December 3, 2025
American Forest & Paper Association (AF&PA) Q3 2025 Containerboard Quarterly Report; October 31, 2025
Packaging Corporation of America Q3 2025 Earnings Report and SEC Filings; October 22-27, 2025
Fastmarkets Containerboard Market Outlook; June 2025