Transportation costs drive PCA mill restart

Pulp & Paper, Mar 2005

CORPORATE STRATEGY

Packaging Corp. of America (PCA) said it planned to shut down its No. 3 corrugating medium PM at Tomahawk, Wis., and restart its No. 1 medium machine at Filer City, Mich., sometime in February. Tomahawk's No. 3 will shut after Filer City's No. 1 is fully running, PCA chairman and CEO Paul Stecko said.

Stecko said higher transportation cost was a key factor that causes the change. He said the restart of the No. 1 machine at Filer City and the shut of the No. 3 unit at Tomahawk does not result in an increase in PCA's overall medium capacity, which is estimated at about 845,000 tpy.

Stecko said running the Filer City machine, which was shut in July 1998, results in lower transportation costs for PCA. He said transportation costs, including on short-haul rails in Wisconsin, were the second highest non-employee cost for the company in the fourth quarter, behind fiber. Stecko added that PCA couldn't ship 110-in medium by truck from Tomahawk and can do it efficiently from Filer City.

The No. 3 machine at Tomahawk and the No. 1 machine at Filer City have capacity of 65,000 tpy, he said. The company expects $3 million to $4 million in savings annually from the move.