Dive Brief:
- Packaging Corporation of America reduced or deferred some containerboard export sales in May and so far in June to rebuild its United States box plant inventory in the second half of the year, said CEO Mark Kowlzan during the Wells Fargo Industrials & Materials Conference on Wednesday.
- That follows the company’s 90,000-ton inventory drawdown in March and April. “I can’t remember the last time that number’s ever been that big in a two-month period of time,” Kowlzan said.
- Corrugated demand remains robust, according to Kowlzan. The company’s corrugated shipments per day in April and May were up 24% year over year, while legacy shipments were up 4.5% in April and 3.5% in May.
Dive Insight:
PCA produces all of its board and packaging products in the United States. It ships to roughly 30 countries, but “we don't ship a lot to any one country — it's a few thousand tons here or there,” Kowlzan said. The company is deferring some of its containerboard export sales because demand in the domestic box plants is so high, and that’s both the priority and highest-margin business, he said. PCA anticipates higher seasonal volumes and further demand growth in the third and fourth quarters.
The move is expected to affect earnings per share, though. “Reducing export sales and building some inventory will hit us for three or four cents in the second quarter, but will ultimately benefit us with higher integrated sales in the box plant side of the business” during the second half of 2026, Kowlzan said.
He reiterated a theme mentioned during an earnings call in April: The containerboard market remains tight, and open market supply is “hard to find.” That follows the industry’s recent supply rationalization. Containerboard producers announced facility shutdowns in 2025 totaling nearly 10% of North American production capacity, the last of which were finalized earlier this year.
Higher-than-expected inflation for freight costs is a headwind. “Additionally, we've had to ship greater distances and utilize more spot freight to keep our box plants supplied in the very tight conditions we're running under,” Kowlzan said. PCA expects a $10 million to $12 million financial hit from freight costs in the second quarter.
A similar headwind is recycled fiber prices escalating more than expected. “It's not just what it costs to buy a ton of OCC. It's delivering that ton of OCC to your plant, to your mill, the transportation element of that,” Kowlzan explained.
PCA has been more in the recycled side recently due to its acquisition of Greif’s containerboard business in September, according to Kowlzan. He reported being pleased with the recapitalization of those assets. The two acquired mills have performed well in the quarter so far, with May proving to be a record production month.
“Greif will be the gift that keeps on giving for the next few years,” Kowlzan said.
The first $50 per ton net price increase recognition for PCA’s initial containerboard price increases announced earlier this year began in June. In May, PCA announced a second price increase effective June 1, “given our inventory and demand situation, as well as higher freight and other operating costs,” Kowlzan said. This increase is being implemented now and is expected to “meaningfully show results in the third quarter.”
As far as PCA’s plans to convert three mills to gas turbine technology to become energy independent, Kowlzan said the company is keeping costs down by purchasing assets from other closed mills and recommissioning them for pennies on the dollar. The three 50-megawatt units already have been shipped to the Riverville Mill in Virginia, the Jackson Mill in Alabama, and the DeRidder Mill in Louisiana. If purchased new, the total cost for those turbines would run around $100 million, Kowlzan said, but the used ones only cost a total of $5 million.
