What's Happening in the OCC Market

Smurfit Westrock emerged from the strategic merger between Ireland's Smurfit Kappa and Atlanta's WestRock, creating one of the biggest consolidations in the global packaging industry. The $11.2 billion deal closed in July 2024, forming the largest containerboard and boxmaking company in the world. This merger provides unmatched scale in the old corrugated container (OCC) market, positioning the company to capitalize on explosive market growth.

The OCC market is experiencing tremendous expansion, with global sales expected to reach $72.7 billion by 2035, growing at an impressive 4.7% annually. Despite facing challenges including facility closures, capacity cuts, and market volatility, the new entity is strategically positioned to leverage the rising demand for sustainable packaging driven by e-commerce growth and stringent environmental regulations.

Merger Completion and Current Operational Status

The Smurfit Kappa-WestRock merger officially commenced on July 8, 2024, with Smurfit Westrock beginning trading on both the New York and London Stock Exchanges. Following the deal's announcement on September 12, 2023, the combined company now operates across 40 countries with over 100,000 employees, cementing its position as the largest containerboard and boxmaking company globally.

Key Merger Details

• WestRock shareholders received $43.51 per share
• Smurfit Kappa shareholders hold approximately 50.4% of the new company
• WestRock shareholders own 49.6%
• Tony Smurfit serves as CEO
• Ken Bowles assumes the role of Chief Financial Officer

The merged entity boasts an impressive infrastructure with 63 paper mills and 500 converting facilities globally, commanding approximately 23 million tons of mill capacity worldwide. This massive scale enables comprehensive operational synergies through complementary geographic coverage and diversified product lines.

Product Portfolio

Smurfit Westrock delivers an extensive range of packaging solutions including:

• Corrugated packaging
• Consumer packaging
• Specialized Bag-in-Box options
• Point-of-sale displays

This diversified capability allows the company to serve customers across multiple industries while leveraging global reach to optimize production and distribution networks.

Post-Merger Restructuring and Capacity Optimization

Recognizing the merger's synergistic potential, Smurfit Westrock is aggressively optimizing operations through strategic facility consolidation and capacity reduction. In May 2025, the company announced the closure of four facilities, impacting approximately 650 employees across the United States and Germany.

Facility Closures Include:

• Coated recycled board mill in St. Paul, Minnesota
• Containerboard mill in Forney, Texas
• Two converting facilities in Germany

This restructuring eliminates more than 500,000 tons of capacity in both containerboard and coated recycled paperboard. CEO Tony Smurfit emphasized that these decisions stem from "a realistic view of our current and future needs" while considering operating costs and pursuing continuous business improvement.

Financial Impact

• $99 million in pre-tax charges from closures
• $42 million allocated for severance payments
• $57 million designated for restructuring costs

Beyond recent announcements, the company's capacity optimization strategy extends globally. In the first-quarter 2025 earnings call, management revealed additional capacity reductions of nearly 600,000 tons in Mexico and the Netherlands. Simultaneously, the company is investing in operational excellence through 25 new converting machines designed to reduce costs and enhance reliability.

OCC Market Dynamics and Pricing Volatility

The old corrugated container market has experienced significant price volatility in recent years, directly impacting Smurfit Westrock's operations and profitability. The global OCC market reached $44.5 billion in 2024 and is projected to surge to $72.7 billion by 2035, representing a robust compound annual growth rate of 4.7%.

Price Volatility Trends

The market has witnessed dramatic price fluctuations:

• February 2024: U.S. prices peaked at $91 per ton (a 176% increase from $33 per ton in February 2023)
• December 2024: Prices moderated to $66 per ton (a 16% decline year-over-year)
• Early 2025: Analysts predict stabilization around $76 per ton

Market Drivers

Food and beverages command over 35% of market share, while export demand significantly influences pricing. Foreign market demand has elevated prices by $10 to $15 per short ton on both East and West coasts in early 2025. These market dynamics directly affect Smurfit Westrock's operational costs and strategic planning, particularly given the company's consumption of approximately 15 million tons of recycled fiber annually.

Market Growth Drivers and Industry Demand

The OCC market's rapid expansion stems from several powerful catalysts that strengthen Smurfit Westrock's strategic positioning. The food and beverage industry serves as the primary demand driver, fueled by increasing consumption of packaged foods, ready meals, and beverages, creating sustained demand for secondary and tertiary packaging solutions.

E-commerce Impact

E-commerce growth continues driving corrugated packaging demand, with Bloomberg Intelligence projecting:

• Box shipments reaching 385 billion square feet
• Shipment volumes surpassing 31 million tons by 2025
• Growth rate of 0.5-1% from 2024 levels

Sustainability Momentum

Environmental regulations and sustainability initiatives increasingly drive demand for recycled packaging materials. In 2018, the U.S. recovery rate for OCC achieved a record 96.4%, demonstrating exceptional industry efficiency in capturing and recycling corrugated materials.

Production Statistics

U.S. mills utilized 16.44 million tons of recovered paper in the first half of 2024, marking a 6.8% increase compared to the previous year. OCC consumption rose 8.2% to 12.34 million tons during this period, driven by new recycled capacity additions in North America.

Five new machines launched between January 2023 and December 2024, adding 2.4 million tons per year of 100% recycled containerboard capacity. Key operators include Domtar, Cascades, ND Paper, Atlantic Packaging, and Pratt Industries.

Global Market Projections and Regional Dynamics

The global OCC market demonstrates robust growth potential across diverse regions, with distinct patterns emerging between developed and developing markets. Market analysts project varying growth trajectories:

Growth Projections

• 2024-2034 first half: 4.6% growth
• 2024-2034 second half: 4.8% growth
• 2025-2035 first half: 3.7% growth
• 2025-2035 second half: 5.7% growth

Regional Dynamics

Developing markets will significantly boost OCC consumption through:

• Retail expansion
• Industrialization
• Urbanization
• Growing regulatory pressure against single-use plastics

Advanced markets focus on enhancing recycling efficiency through:

• AI-driven sorting technologies
• Advanced fiber recovery systems
• Quality improvement initiatives

2025 Market Outlook

The market anticipates heightened demand driven by:

• Stricter sustainability regulations
• Expanded OCC adoption in emerging sectors
• Healthcare, electrical, electronics, and foodservice industry adoption
• Localized OCC sourcing strategies
• Decentralized collection infrastructure investments

Sustainability and Environmental Impact

Smurfit Westrock holds a commanding position in the OCC market, aligning perfectly with escalating environmental sustainability focus from corporations and regulators. The company has secured $2 billion in green finance and achieved top Fortune 500 sustainability ratings for the Paper and Containers Industry.

Environmental Leadership

• $2 billion raised in green finance
• Fortune 500 sustainability leadership in Paper and Containers Industry
• 15 million tons of recycled fiber used annually
• $8.8 million invested in community projects
• 1,400+ species protected through partnerships (including WWF Colombia)

Recycling Benefits

OCC recycling delivers substantial environmental advantages:

• Reduced deforestation
• Lower carbon footprint in packaging production
• Circular economy support through waste minimization
• Resource maximization

Quality Challenges

Contamination issues continue affecting OCC quality and recycling efficiency. Single-stream recycling systems experienced elevated contamination rates, particularly during COVID-19 as consumers mistakenly disposed of non-recyclable materials. Maintaining high-quality OCC streams requires enhanced sorting technologies and improved collection practices to meet manufacturing standards.

Competitive Landscape and Industry Consolidation

The Smurfit Westrock merger exemplifies ongoing consolidation in the packaging industry, as companies pursue scale advantages and operational improvements. Both entities have rich merger histories:

Company Heritage

• WestRock (formed 2015): RockTenn and MeadWestvaco merger
• Smurfit Kappa (formed 2005): Kappa Packaging acquired Jefferson Smurfit

Investor Perspectives

The merger faced scrutiny from institutional investors, notably PrimeStone Capital (London-based), which holds approximately 0.8% of Smurfit Kappa shares. The activist fund questioned strategic rationale and potential synergies, suggesting an International Paper merger might deliver superior value. However, shareholders from both companies approved the deal, demonstrating confidence in the new entity's strategic positioning.

Market Adaptation

Industry trends favor enhanced efficiency and cost reduction. Smurfit Westrock rapidly implemented facility closures and capacity cuts to adapt to market conditions. The company's operational integration capabilities position it to navigate price volatility while maintaining market share and realizing anticipated merger synergies.

Financial Performance and Market Outlook

Smurfit Westrock's first-quarter 2025 results demonstrated strong market positioning despite challenging conditions. CEO Tony Smurfit characterized performance as "strong," highlighting resilience in volatile market environments.

Q1 2025 Performance Highlights

• Consumer packaging shipments: 1% increase year-over-year
• Third-party paper sales: declined during the quarter
• Latin America: strong growth, particularly in Brazil with continued expansion

Market Projections

The overall OCC market outlook remains positive despite short-term fluctuations:

• 2025 growth expectation: 4.5% year-over-year
• Box shipment correlation: closely tied to disposable income and consumer spending
• E-commerce impact: continued demand support, though moderating from pandemic peaks

Economic Scenarios

Bloomberg Intelligence projects varying outcomes based on economic conditions:

• Economic growth scenario: 1.5-2% box shipment increase
• Worst-case tariff scenario: 1.5% shipment decline

Strategic Positioning

Market pricing should stabilize near historical averages as supply and demand balance following 2023-2024 volatility. The company's investment in advanced converting equipment and global operations optimization positions it to benefit from price stabilization while maintaining competitive costs.