Executive Summary
Smurfit WestRock has taken steps to streamline its footprint—closing mills like St. Paul and investing in new converting capacity in Stevenson, Alabama. These moves are directionally correct and will help reduce freight inefficiencies. However, our analysis shows that while these portfolio shifts are beneficial, the company still faces structural challenges that keep freight costs elevated compared to peers.
Why Freight Costs Matter
Freight and logistics represent a significant cost component for packaging companies. For Smurfit WestRock, freight costs are estimated at 7–8% of revenue, the highest among major peers:
| Company | Revenue (2024) | Est. Freight % of Revenue | Est. Freight Spend |
|---|---|---|---|
| Smurfit WestRock | $21.1B | 7–8% | $1.5–$1.7B |
| International Paper | $18–19B | 6–7% | $1.1–$1.3B |
| PCA | $8.4B | 5–6% | $400–$500M |
| Graphic Packaging | $8.8B | 4–5% | $350–$400M |
(Source: Company filings, industry benchmarks)
Historical Trucking Rate Trends
Freight exposure is amplified by rate volatility. U.S. dry van rates surged during the pandemic and have since normalized:
| Year | Avg. Dry Van Rate ($/mile) |
|---|---|
| 2020 | $1.90 |
| 2021 | $2.85 |
| 2022 | $3.00 |
| 2023 | $2.50 |
| 2024 | $2.25 |
| 2025 | $2.05 |
(Source: DAT Freight Index, industry reports)
Back-Test: Rate vs Freight Spend
Our correlation analysis shows freight spend does not move proportionally with trucking rates for most companies. Smurfit WestRock’s freight costs rose even as rates fell, driven by volume growth and network complexity.
| Company | Correlation (Rate vs Freight Spend) |
|---|---|
| Smurfit WestRock | -0.22 (weak negative) |
| International Paper | +0.97 (strong positive) |
| PCA | -0.02 |
| Graphic Packaging | -0.09 |
(Source: Internal model using historical revenue and rate data)
Network Design: The Hidden Driver
Freight inefficiencies often stem from non-co-located mills and converting plants. Here’s a comparison:
| Mill Location | Nearest Folding Carton Plant | Distance |
|---|---|---|
| Florence, SC (SWR) | On-site (Paper Mill Rd) | <1 mile |
| St. Paul, MN (SWR) | Clinton, IA | ~280 miles |
| Counce, TN (PCA) | Arlington, TX | ~500 miles |
| West Monroe, LA (GPK) | Monroe, LA | ~7 miles |
Implication: Graphic Packaging’s co-location strategy minimizes intermediate freight. Smurfit WestRock has some integrated sites (Florence), but others like St. Paul were far from converting capacity, adding hundreds of miles of transport.
Management Actions
- Mill closures (e.g., St. Paul) reduce long-haul intermediate freight.
- New converting capacity in Stevenson, AL improves Southeastern integration.
- These moves are incremental but positive.
What More Is Needed
- Broader network redesign to co-locate mills and converting plants.
- Greater use of regional hubs to cut intermediate miles.
- Investment in intermodal and automation to offset freight volatility.
Bottom Line
Smurfit WestRock is making the right moves, and these portfolio shifts are helping. But the opportunity is far from exhausted. A more aggressive push toward mill-converter integration—similar to Graphic Packaging’s model—could unlock significant savings and reduce exposure to freight inflation.