WestRock Co. will permanently stop operating its paper mill in North Charleston on Aug. 31, the Atlanta-based packaging company said Tuesday.
The mill employs about 500 people. They will receive severance and outplacement help under WestRock policy and labor union agreements, the company said.
“The combination of high operating costs and the need for significant capital investment were the determining factors in the decision to cease operations at the mill,” WestRock said in its announcement. The company said it is working to improve its return on invested capital and get the most out of its assets.
“WestRock and its predecessor companies have had a long history in the region operating the North Charleston mill, and the contributions of the team members over the years have been greatly appreciated,” said David B. Sewell, WestRock’s chief executive officer. “The decision to close a facility and impact the lives of our team members is never easy, and we are committed to assisting our North Charleston team with exploring roles at other WestRock locations and outplacement assistance.”
What the mill makes
The mill produces containerboard, uncoated kraft paper sold as KraftPak and unbleached saturating kraft paper sold as DuraSorb. Its combined annual capacity is 550,000 tons, WestRock said.
WestRock will make the containerboard and uncoated kraft at its other mills. It intends to get out of the unbleached saturating kraft paper business once the shutdown is complete, the company said.
The cost
WestRock expects about $515 million in charges tied to the closure, according to a filing with the Securities and Exchange Commission. That includes $396 million in asset write-downs or related charges, $28 million in severance and other employee costs, and $91 million in other restructuring costs such as shutting down the mill, ending contracts and carrying the property.
About two-thirds of the charges will not involve cash, the company said. It expects to record most of them in its fiscal second quarter. The remaining third will be paid in cash over several years and covers severance, leases and other restructuring costs.
A long run under several owners
The mill belonged to MeadWestvaco Corp. until July 1, 2008, when KapStone Paper and Packaging Corp. bought it, along with a Summerville lumber mill and four South Carolina chip mills, for $485 million. At the time, MeadWestvaco said about 1,100 employees at the facilities in that sale would move to KapStone.
WestRock, formed in 2015 by the merger of RockTenn and MeadWestvaco, brought the mill back into the family when it completed its acquisition of KapStone on Nov. 2, 2018.
In announcing that deal, WestRock said KapStone’s kraft paper products, which WestRock did not make, would broaden its portfolio. KapStone had listed the North Charleston mill’s capacity at 975,000 tons of containerboard and specialty paper in its annual report for 2016.
The neighbor next door
The decision also matters to Ingevity Corp., the North Charleston specialty chemicals company that WestRock spun off in 2016. Ingevity runs a chemicals plant beside the mill.
In its 2016 annual report, Ingevity said it relied on the mill, then owned by KapStone, for water, compressed air, steam and wastewater treatment at that plant, and that part of the plant sits on land leased from the mill’s owner.
In its annual report filed in February, Ingevity said it depends on third parties for utilities and related services at several plants, including North Charleston. “The provision of these services would be at risk if any of the counterparties were to idle or permanently shut down their plant,” the report said.
WestRock’s announcement did not mention Ingevity.
The mill sits along the Cooper River next to SC Ports’ North Charleston Terminal, as federal aerial imagery taken in April shows. WestRock did not say what it plans for the property after the shutdown.
