Packaging Corporation of America (PCA) will discontinue production of uncoated freesheet (UFS) and coated one-side (C1S) grades at its Wallula, Washington mill in the 2Q 2018 to begin the conversion of its 200,000 ton-per-year No. 3 paper machine to a 400,000 ton-per-year high-performance 100% virgin kraft linerboard machine.
The conversion of the No. 3 paper machine at the Wallula Mill is planned for the 2Q 2018 with an initial production rate of approximately 60% of capacity. Ultimately, production will increase to 1,150 tons per day once a new headbox, forming section, and shoe press are added in the 4q 2018. The capital cost of the conversion is expected to be approximately $150 million.
Discontinuing paper operations at the Wallula Mill will result in pre-tax cash severance and other shutdown charges of approximately $20 - 25 million and approximately $45 - 55 million of pre-tax noncash asset impairment and accelerated depreciation charges. Charges of $25 - $35 million are expected to be recorded in the 3Q 2017. The Mill’s No. 2 paper machine will continue to produce 150,000 tons-per-year of semi-chemical medium.
PCA Chairman and CEO Mark Kowlzan said, “Our strategy is to improve the overall profitability of the paper business for PCA by focusing our people and investments on increasing our competitiveness and ensuring a sustainable future in the office and printing & converting markets with our mills in International Falls, MN and Jackson, AL. In addition, at our current containerboard integration rate of 95%, the low-cost conversion of the No. 3 paper machine at our Wallula Mill provides us with much needed linerboard capacity, allows us to integrate over 200,000 tons of containerboard to our Sacramento Container acquisition, and enables further optimization and enhancement of our current mill capacity and box plant operations. The conversion will significantly enhance the mill’s profitability and viability.”
PCA is the fourth largest producer of containerboard and corrugated packaging products and the third largest producer of uncoated freesheet paper in the United States.
