While it has not yet been determined how much production will be absorbed at the Roanoke Rapids WestRock paper mill after the company announced Tuesday it was closing its North Charleston, South Carolina, facility, the future of the local plant appears stable.
The company said in a news release that containerboard and uncoated kraft paper produced in South Carolina will be manufactured at other WestRock facilities. The South Carolina mill, which will close August 31, also produces unbleached kraft paper but the company said it intends to exit that business when the shutdown of that facility is completed.
“While nothing is ever a certainty in business, the foreseeable future of the Roanoke Rapids mill appears to be stable,” said Billy Smith, president of United Steelworkers Local 9-0425. “WestRock invests millions of dollars yearly in our mill and has communicated plans to do so going forward.”
On the announced closing of the North Charleston mill, Smith said, “The members of USW Local 9-0425 are both shocked and saddened to hear of the impending closure of our sister mill in Charleston, South Carolina.”
He said the paper industry is a very competitive market that operates on low margins where an economic decline or over-production due to new capacity and capital improvements can result in curtailments or mill closures. “Unfortunately this appears to be what is transpiring in Charleston,” Smith said. “The United Steelworkers will have resources in place to assist with contractual severance packages and job placement and WestRock has committed to helping place workers at other facilities where possible according to their press release.”
In its statement Tuesday WestRock CEO David B. Sewell said the company is committed to improving its return on invested capital as well as maximizing the performance of its assets. 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 South Carolina mill.
“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,” Sewell said. “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.”
The products produced at the North Charleston mill, where approximately 500 people are employed, represents a combined capacity of 550,000 tons a year, the company said.
Employees will receive severance and outplacement assistance in accordance with WestRock policy and labor union agreements.
In a filing with the United States Securities and Exchange Commission on Tuesday, the company said it expects to incur aggregate charges of approximately $515 million associated with the North Charleston mill closure, consisting of $396 million in asset write-down or related charges, $28 million in severance and other employee costs, and $91 million in other restructuring costs.
The company will recognize the substantial majority of the charges in the second fiscal quarter of 2023 and expects two-thirds of these charges to be non-cash in nature.
The remaining one-third of these charges are expected to be paid in cash over several years and relate to severance and other employee costs, leasing costs and other restructuring costs. The company said these estimates are subject to a number of assumptions, and actual results may differ from initial estimates.