Views: 0 Author: Site Editor Publish Time: 2025-02-12 Origin: Site
The paper industry giant is facing a sudden "earthquake"!
On Thursday, International Paper announced the permanent closure of four plants across four U.S. states. This unexpected and shocking decision has put 674 employees at risk of unemployment and signals a potential deep reshuffle in the North American paper market.
Why has this industry giant made such a drastic move, cutting off key assets despite the pain? What industry shifts and strategic considerations are driving this latest wave of plant closures?
International Paper announced on Thursday that it will permanently close four plants across four U.S. states, affecting 674 employees. The plants to be closed include: the Red River Containerboard Mill in Campti, Louisiana; the box plant in Hazleton, Pennsylvania; the #3 machine in St. Louis; and the recycling plant in Phoenix. Operations at all these plants are scheduled to cease by the end of April.
International Paper estimates that the closure of the Red River Containerboard Mill will directly reduce the company’s annual containerboard production capacity by approximately 814,000 tons. A company spokesperson stated via email on Thursday that customer demand will be met by other plants within the International Paper network to ensure business continuity. According to a securities filing released by International Paper on Thursday afternoon, the majority of the affected employees are based at the Louisiana plant, which employs 481 workers. The plant's shutdown is planned to begin on March 31.
Furthermore, according to a Worker Adjustment and Retraining Notification (WARN) submitted by International Paper on Thursday morning to Missouri, 72 full-time employees at the St. Louis plant will face job cuts. These layoffs are expected to begin on April 14, the same day the plant's operations will end. The WARN notice specifically pointed out that hourly workers at the St. Louis plant are represented by the United Steelworkers Union Local 11-0531 and the International Union of Operating Engineers Local 2. However, since the plant closure is permanent, neither part-time nor full-time employees will be entitled to any rights related to position transfers. According to the WARN notice, all employees may apply for job vacancies at any other International Paper plants.
In the closure of these four plants, a total of 674 employees will be affected, including 495 hourly workers and 179 salaried employees. In a press release, International Paper stated that the company will strive to minimize the impact on employees by using various methods, including natural attrition, employee retirements, and filling existing vacancies at other International Paper plants. The company will provide reemployment assistance and mental health support resources for affected employees, and “where possible,” severance packages and other benefits.
A spokesperson noted that, since the relevant processes have just begun, International Paper is currently unable to determine how many employees will ultimately be retained. Tom Hamic, President of North American Packaging Solutions for International Paper, said in a statement, "The decision to close any plant is incredibly difficult, as it undoubtedly has a profound impact on our team members, their families, and the surrounding communities. We sincerely thank the team members who will be leaving for their contributions and will do everything we can to support them."
Although International Paper has not publicly disclosed the specific reasons for the closure of each plant, a spokesperson noted that the company will continue to assess its system, including capacity, operational needs, and overall business conditions.
According to a filing submitted to securities authorities, International Paper expects that the plant closures will result in a pre-tax total charge of approximately $357 million through March 31. This cost includes about $311 million in pre-tax non-cash asset write-offs, and approximately $46 million in pre-tax cash severance and other shutdown-related costs.
Since last fall, International Paper has announced the layoff of more than 1,500 employees. Previously, the newly appointed CEO, Andy Silvernell, launched a strategic realignment and optimization plan in July last year aimed at improving the company's profitability. During the company's most recent earnings call in January, Andy Silvernell detailed reforms in its box plant business. These measures include investment projects, such as the construction of a new plant in Waterloo, Iowa. In January, Andy Silvernell also mentioned that while significant progress had been made in the company's optimization plan, much work still remains, and turning around the business will take time. He expects 2025 to be a "transformational year" for International Paper, with the recent "stabilizing trend" expected to continue.
Given the ongoing optimization efforts at International Paper, some industry analysts were not surprised by the newly announced plant closures. Michael R. Loxlan, Senior Paper and Packaging Industry Analyst at Trust Securities, noted in a memorandum sent to investors on Thursday: "We had always anticipated that International Paper would announce the closure of certain production facilities as part of its ongoing transformation strategy, aimed at balancing the company’s capacity with market demand." Furthermore, this adjustment may not be the last short-term change in the company's industrial layout and workforce size. While a spokesperson did not directly confirm whether further plant closures or layoffs will occur, they emphasized that International Paper is currently in a critical period of transformation.
Michael R. Loxlan believes, "We have reason to believe that, as International Paper continues its comprehensive system optimization, this announcement may be just the precursor to more plant closures (including paper mills and box plants) in the future." He also pointed out that, overall, the reduction in capacity is likely to have a positive and favorable impact on the North American containerboard market.
Additionally, International Paper is still evaluating strategic options for its global cellulose fiber business. The company has previously stated that this strategic review will most likely result in a sale.
On the other hand, International Paper completed its acquisition of DS Smith on January 31, a move that has positioned the company as one of the largest packaging enterprises in the world.
