In the early morning hours of December 3, 2025, the hum of machinery fell silent at the Wallula, Washington, mill. After a series of swift decisions, the company initiated a massive restructuring, resulting in the loss of 200 jobs and a staggering $205 million charge.
As the shutdown unfolded, workers and local officials braced for the consequences. The impact on the community and the livelihoods of those dependent on the facility was profound. What prompted this drastic move, and what will become of the town that relied on this plant for decades? The full story is still unfolding, but crucial questions remain unanswered.
Mounting Pressures
The closure reflects broader challenges within the North American containerboard industry, which saw a 10% loss in fiber capacity during 2025. Analysts attribute this to a persistent downturn in demand and the closure of mills, with no significant recovery expected until at least 2027.
High-cost mills, unable to compete with cheaper, more efficient facilities, are feeling the strain, leading to difficult decisions like this one.
The Plant’s Legacy
The facility in question has been a cornerstone of industrial production along the Columbia River for decades. Acquired by the company in 2013, it played a crucial role in the company’s growth, helping cement its position as one of the largest containerboard producers in North America.
This shutdown marks the end of an era for the mill, which has long been a major employer and a vital part of the local economy.
Cost Squeeze
Rising costs for raw materials and energy at the facility forced the company to repeatedly idle its operations over the past two years. CEO Mark Kowlzan acknowledged that the mill’s cost structure had become unsustainable, with expenses surpassing industry norms by $125 per ton.
Despite efforts to reduce costs, the mill’s operational configuration could no longer be justified, leading to the difficult decision to shut it down.
Shutdown Plan
Packaging Corporation of America will shut down the No. 2 paper machine and kraft pulping facilities at Wallula, though it will maintain the No. 3 paper machine and recycled pulping operations.
The entire reconfiguration is scheduled to be completed by the first quarter of 2026. The decision will result in the loss of around 200 jobs, and the company expects $205 million in restructuring charges.
Regional Impact
The shutdown will have a significant economic ripple effect on the Wallula region, where the mill is one of the largest employers.
The facility was on track to produce 400,000 tons of containerboard in 2025, and cutting its capacity in half will impact contractors, suppliers, and local businesses that depend on the plant’s operations. This move could destabilize the local economy.
Human Toll
PCA has pledged to support affected employees, providing severance and transition assistance. CEO Kowlzan emphasized that the decision is not a reflection of the workers’ performance.
However, the impending layoffs will deeply affect approximately 200 families in the small-town area, with the closure set to complete by March 2026.
Capacity Shift
The Wallula facility’s capacity loss will amount to 250,000 tons annually. To mitigate this, PCA plans to enhance production at other mills, including increasing capacity at its Jackson, Alabama mill.
By Q4 2026, PCA intends to replace much of the lost production with 140,000 tons of lightweight linerboard from new operations.
Industry Downturn
This closure is part of a broader trend of capacity cuts in North American containerboard production. In 2025, the sector faced its third consecutive downturn year, with recovery projected to be slow.
PCA’s own third-quarter performance in 2025 missed expectations, primarily due to weak demand and rising raw material costs.
Million-Dollar Hit
PCA’s restructuring will come at a significant cost. The company estimates $205 million in pre-tax charges, which includes $165 million in non-cash impairment and depreciation.
The remaining $40 million will cover severance and other related costs. When divided among 200 workers, this amounts to more than $1 million per employee, illustrating the high expense of shutting down legacy operations.
Internal Strain
PCA’s decision to close Wallula is part of a broader strategy to shed high-cost assets. In addition to the Wallula closure, PCA has also closed mills in Pennsylvania, North Carolina, and Georgia.
While these moves aim to streamline operations, they have strained relationships with workers and local communities, who feel the brunt of these cutbacks.
Leadership’s Rationale
CEO Mark Kowlzan has framed the Wallula closure as a necessary step to maintain long-term competitiveness. He pointed to the mill’s “challenging and worsening cost environment” as the primary reason behind the closure.
Despite the tough decision, PCA is focused on improving efficiency and ensuring future growth by investing in more sustainable facilities.
Reconfiguration Strategy
Following the shutdown, PCA plans to operate the Wallula site as a single-machine, fully recycled mill. This reconfiguration is expected to reduce production costs by $125 per ton and simplify operations, allowing the mill to remain competitive in the market.
However, it will only provide a fraction of the facility’s previous output.
Growth vs. Risk
Even as PCA scales down Wallula, it is simultaneously expanding. In July 2025, the company acquired Greif’s containerboard business for $1.8 billion, aiming to replace lost capacity and improve operations at its other facilities.
This move reflects PCA’s balancing act between short-term cuts and long-term expansion.
What Comes Next?
While PCA aims to fully replace Wallula’s reduced output by the end of 2026, analysts warn that the broader downturn in the containerboard sector may persist.
The company’s strategy of consolidating and cutting costs may be necessary for survival, but it remains to be seen if these measures will be enough to stabilize the industry and prevent further closures.
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