Smurfit Westrock Expects $700M Inflation Hit in 2026

By Daniel Okafor

Smurfit Westrock expects energy and freight inflation to add an estimated $700 million in costs in 2026 — a figure CEO Tony Smurfit called "materially above our earlier expectations" during Wednesday's earnings call. The company cut its 2026 adjusted EBITDA projection to $4.7 billion, down from an initial range of $5 billion to $5.3 billion.

The announcement lands amid what Smurfit described as "unprecedented and greater-than-expected cost inflation," driven mainly by energy and freight. Third-quarter results also absorbed unusual disruptions, including heat waves in Europe and cyclosporiasis outbreaks in the United States. The cost pressure dominated everything else.

How is the company fighting back?

Price increases are the primary lever. Smurfit pointed to the "spiraling cost of energy" that is "reaching levels that we have rarely seen" and shows no sign of easing. His tone was blunt: "We're being whacked by these massive cost increases in energy that we're going to get back."

The pricing mechanics show the squeeze. When containerboard producers launched their third wave of price hikes this year in July, Smurfit Westrock announced a $100 per ton increase. Fastmarkets RISI recognized $70 per ton of that in September.

"From our perspective we would have expected to get 100, but we'll wait and see what happens going forward," Smurfit said.

Of the net $170 per ton that the Fastmarkets RISI index has recognized this year, $100 has gone straight to cost recovery, according to Smurfit. Rising costs ate into the margin gains executives had hoped for. They now expect the recently recognized $70 to translate into actual margin enhancement.

What's happening by region?

The North American picture is mixed. The business keeps improving in most areas, but "this improvement is masked by the amount of increased costs that we have incurred," Smurfit said. Corrugated volumes improved sequentially, and paper bag sales got a notable boost — the company says it's the largest U.S. producer of paper bags.

Demand remains tight across grades. "We've been in a sold-out position for the last number of months — and we have still orders to fulfill from April and May," Smurfit said. "The structural change that's happened in North America has been very significant."

In Mexico, overall demand is "as weak as I have seen it in recent years," he said. Cost-cutting measures and footprint rationalizations are helping offset that weakness. In EMEA and APAC, the company continues to "outperform our integrated peers," with the consumer business growing "radically" in Europe.

High diesel prices add another burden: an estimated $120 million to $130 million in additional full-year cost in North America alone.

What does this change for the 2030 target?

Not the target itself, only the timeline. Executives still expect to hit roughly $7 billion in adjusted EBITDA by the end of 2030, as laid out in the medium-term plan released in February.

"Clearly, the backdrop in cost for 2026 has kind of impacted the timing, but not the recovery or achievement of the target," Bowles said. "It'll just be kind of a flex in between the years" leading up to 2030.

Near-term signals are stable but watchful. October volumes ran in line with last year, and November orders look decent so far. Executives are monitoring whether the outcome of next week's U.S. midterm elections could affect demand.

Smurfit framed 2027 as the payoff point for this year's actions: "As we move into 2027, we believe the actions we've taken during the year will more than offset these costs."