Smurfit Westrock CEO Says Europe's 10-To-1 Gas Gap Versus U.S. Forces Closures Or More Price Hikes
Tony Smurfit says the company won't hedge gas at today's levels, and that its 2026 freight and energy bill is about $700 million higher.
European natural gas costs roughly ten times North American levels, and if that persists the continent's paper industry will need "closures or other pricing actions," Smurfit Westrock CEO Tony Smurfit said on the company's third-quarter earnings call on Wednesday. Smurfit Westrock, which makes corrugated boxes, folding cartons and other paper-based packaging, now expects freight and energy costs to run about $700 million above last year's in 2026.
A 10-to-1 gas gap
Speaking from the company's Três Barras mill in Brazil, Smurfit put the European benchmark gas price at about $30 per BTU against about $3 in North America. "So it's a 10 to 1 ratio for the European industry," he said, adding that European paper price increases reflect not tight capacity but the fact that many producers "can't afford to run the mills."
He said that if the gap lasts, "there will obviously have to be other actions, either by closures or other pricing actions." Later he called the ratio "just unsustainable for European industry." He said many competitors have already taken downtime, and noted that European governments tend to keep mills open with subsidies.
Smurfit said the company's own kraftliner mills use less gas and generate their own, which keeps them very profitable.
No hedging at these prices
Smurfit said the company will not lock in gas at current levels. Hedging now, he said, risks being "stuck at 100" and uncompetitive if prices fall quickly, and "you could get caught with your pants down." He said he doesn't believe anyone in the industry is hedging heavily at these levels.
CFO Ken Bowles said the company has stepped in with small hedges along the way but sits below its normal coverage. He put the freight sensitivity in North America at about $80 million of direct impact per dollar on diesel, or $120 million to $130 million with downstream effects.
Bowles said the announced paper increases, a net $170 in North America and a net $140 in Europe, are designed to account for the costs.
Price rises, cost recovery and 2027
The company now expects 2026 adjusted EBITDA of about $4.7 billion, with third-quarter adjusted EBITDA at 1.205 million and a 14.8% margin as stated on the call. Smurfit cited a heat wave in Europe, earthquakes in Colombia and an agricultural contamination issue in the U.S. as hits to volumes.
Of the roughly $170 a ton the industry has pushed through this year, Smurfit said the first $100 mostly went to recovering costs, and later increases would be largely margin. Bowles said the 2030 target is unchanged and the shortfall is timing.
Smurfit said his bigger worry is how energy costs hit end-customer demand. Europe was up a couple of percent on a same-day basis in October, and North America was in line with last year.
Smurfit said the company would do its 2027 budgets the following week, and that early views point to a very good year if conditions hold where they are.
Sources
- Smurfit Westrock Reports Third Quarter 2026 Results – Company Announcement - FT.com — Financial Times
- Smurfit Westrock Non-GAAP EPS of $0.45 misses by $0.12, revenue of $8.16B misses by $120M — seekingalpha.com
- Smurfit Westrock Set to Report Q3 Earnings: What's in the Offing? — Yahoo Finance
- Smurfit Westrock (SW) Lags Q3 Earnings and Revenue Estimates — Yahoo Finance
- https://www.federalregister.gov/documents/full_text/text/2026/10/26/2026-21783.txt — federalregister.gov
