Packaging Corporation of America made a decisive move just months after a major expansion. On December 3, 2025, the third-largest U.S. containerboard producer announced permanent cuts at its Wallula, Washington mill, eliminating 200 jobs and taking a $205 million charge.
The decision came only 92 days after PCA completed its $1.8 billion acquisition of Greif’s containerboard business, signaling a sharp strategic pivot. The cuts reflect mounting overcapacity, rising costs, and shifting demand across the industry. Here’s what’s happening as pressure builds across the sector.
A Sudden Pivot After Expansion
Packaging Corporation of America’s Wallula announcement stunned investors due to its timing. The company reduced annual capacity by 250,000 tons, or 500 million pounds, trimming Wallula’s output from 400,000 tons to 285,000 tons annually. The mill will now operate solely with recycled fiber. PCA permanently shut down the No. 2 paper machine and kraft pulping facilities, while keeping the No. 3 paper machine and recycled pulping operations running.
This restructuring followed PCA’s September 5, 2025 acquisition of Greif’s containerboard business, which added significant scale to its system. Rather than signaling growth alone, the move underscored a hard reality. Overcapacity and cost pressures are forcing producers to rebalance quickly. Wallula’s transformation reflects broader challenges facing older mills operating at a disadvantage in a rapidly consolidating industry.
Longstanding Warning Signs at Wallula
The Wallula mill’s struggles did not begin in December. Its No. 2 paper machine was idled in May 2025 after nearly 2 years of intermittent shutdowns that were initially framed as temporary. Persistent cost pressures and volatile market conditions steadily eroded the mill’s competitiveness, with investors recognizing red flags by early fall.
Over the past 2 years, PCA implemented several operational adjustments, including temporary stoppages during demand downturns and brief recalls when conditions improved. These measures provided only limited relief. By October 2025, third-quarter earnings confirmed the strain. PCA reported earnings per share of $2.51, or $2.73 excluding special items, on $2.31 billion in revenue. Production volumes fell 38,000 tons year over year in corrugated containerboard, while segment sales declined 2.7 percent.
Costs That Could Not Be Escaped
High input costs ultimately drove PCA’s decision. CEO Mark Kowlzan highlighted wood fiber and purchased power as critical disadvantages for Wallula, particularly compared with mills in Tennessee, Alabama, and Ohio. In its December announcement, PCA stated, “Wood fiber and purchased power costs are by far the highest in our system, making the currently configured mill no longer competitive.”
Shifting entirely to recycled fiber offered meaningful relief. PCA estimated savings of approximately $125 per ton, based on 2025 cost levels, which translates to about $31.25 million annually. Nevertheless, the reconfiguration could not fully overcome the mill’s structural limitations. PCA expects the single-machine setup to improve utilization and cost efficiency while maintaining product quality, but the economics no longer support keeping the full operation intact.
Financial Fallout and Worker Impact
The restructuring carries a $205 million charge, including $165 million in non-cash asset write-downs and $40 million in cash costs for severance and facility closures. That cash component averages roughly $200,000 per affected worker, reflecting both severance obligations and the realities of shutting down specialized equipment with limited resale value.
Layoffs are expected by March 31, 2026, providing workers with approximately three months’ notice. PCA acknowledged the human toll, stating, “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.” Negotiations continue with the union, while Wallula, a town of fewer than 300 residents, braces for significant economic disruption.
Acquisition Strategy Meets Industry Reality
The Greif acquisition added two mills in Gladstone, Virginia, and Massillon, Ohio, contributing 800,000 tons of annual capacity and lifting PCA’s total North American capacity to about 6 million tons. Market share rose to nearly 16 percent from approximately 10 percent prior to the deal. Kowlzan pointed to “significant synergies with minimal capital investment,” especially by shifting production to lower-cost sites like Jackson, Alabama and Counce, Tennessee.
Despite Wallula’s reconfiguration, high electricity rates and limited wood fiber availability sealed its fate. PCA still expects the new cost structure to reduce production expenses by about $125 per ton. The company also projects pre-tax benefits of approximately $60 million within 2 years of closing the Greif deal, emphasizing urgency over long-term optimism.
A Broader Reckoning for Containerboard
Wallula’s downsizing mirrors an industry-wide reset in 2025. International Paper cut 1.43 million tons of capacity and eliminated 1,100 jobs through August closures in Savannah and Riceboro, Georgia. Georgia-Pacific and others followed with additional shutdowns. North American containerboard capacity fell roughly 9.5 to 10 percent in 2025, the steepest drop since 2008, according to Truist Securities’ Michael Roxland and the American Forest & Paper Association.
Demand dynamics have shifted sharply. U.S. box shipments declined about 12 percent from pandemic highs, hitting their weakest second-quarter level since 2015. Analysts note that these cuts reflect cost structures more than demand collapse. As consolidation accelerates, profitability increasingly outweighs legacy operations, leaving communities like Wallula to absorb the consequences.
Sources:
“PCA to shut down machines in Washington, affecting 200.” Packaging Dive, December 3, 2025
“Packaging Corporation of America Announces Reconfiguration of Wallula Mill.” BusinessWire, December 3, 2025
“Packaging Corp. to Cut 200 Jobs, Take $205M Charge for Mill Changes.” MarketWatch, December 3, 2025
“Packaging Corporation of America Reports Third Quarter 2025 Results.” Yahoo Finance, October 22, 2025