Tim S. Nicholls
Senior Vice President and Chief Financial Officer at International Paper
Thank you, Mark. Moving to the quarter-over-quarter earnings bridge on slide five. Second quarter operating earnings per share were $1.06 as compared to $0.76 in the first quarter. Price and mix improved by nearly $0.50 per share sequentially, driven by very strong price realizations across all of our business segments. Volume was essentially flat versus last quarter. Demand for corrugated packaging is very strong and demand for fluff pulp is solid while demand for papers continues to recover in all key regions. Second quarter volume in our North American packaging business was constrained by severely low containerboard inventory and fluff pulp shipments were hampered by significant forward congestion.
Our mills and converting system performed well. Operating costs were adversely impacted by a highly stressed supply chain environment for both our inbound materials and outbound shipments as well as the exceptionally low containerboard inventory conditions in our North America packaging system. Maintenance outage costs increased by $0.18 sequentially as we completed our highest maintenance outage quarter of the year. On an absolute level, maintenance costs were $250 million in the second quarter. Input costs were a significant headwind for most materials, and energy costs remained elevated, providing little relief following the winter storm. OCC represented about half of the sequential increase in input costs.
Although some of the pressure in input costs could be transitory, such as the impact of heavy rainfall on our wood cost in the Gulf region, the extremely tight transportation environment will continue to put pressure on all inbound materials. Every mode of transportation is tight, and we expect them to remain tight as we move to the second half of the year. Corporate expenses benefited from favorable reserve adjustments. Our tax rate of 24% in the second quarter was sequentially lower, primarily due to discrete period tax benefit. And equity earnings improved substantially on very strong performance from Ilim. Turning to the segments and starting with Industrial Packaging on slide six. We continue to see strong demand across all channels, including boxes, sheets and containerboard.
As Mark indicated, we operated with extremely low containerboard inventory in the US system. These conditions impacted volume and operating costs in the quarter. We are working to replenish inventories following the winter storm and maintenance salvages as we manage through a tight transportation environment. Taking a look at our second quarter performance, volume was sequentially flat. Strong demand in our North American box and containerboard channels offset lower seasonal demand in our EMEA business. Volume across our US channels grew by 10% as compared to last year, which includes our US box system, open market containerboard customers as well as our recent equity partnerships with strategic sheet feeders. Price and mix increased by about $110 million in the quarter. We're making excellent progress on the realization of our barge increase.
Our mills and converting systems performed well. However, operating costs were impacted by severely low containerboard inventories and stressed transportation environment with congestion across all modes. Maintenance outage costs increased sequentially as we completed the highest maintenance outage quarter of the year. In our Industrial Packaging business, we've completed about 75% of our planned maintenance outages in the first half of the year. Income costs were a significant headwind in the quarter, primarily driven by higher costs for OCC, chemicals and distribution. About $10 million of the sequential increase in input costs occurred in our EMEA Packaging business, primarily for OCC and energy. Taking a closer look at OCC. We consume about five million tons annually across our US mill system and Spain.
We see the rise in OCC cost as a reflection of the underlying strength in global demand for corrugated packaging. We expect OCC costs to rise further in the third quarter even as seasonal generation improves. We expect continued US and export demand, especially from India and Southeast Asia, which were largely offsetting pre-restriction OCC exports to China. Turning to slide seven. We're well positioned for strong earnings growth and margin expansion in our packaging business in the third and fourth quarter. Demand is strong across all of our channels. We expect continued robust volume growth across our US channels.
And we are making excellent progress on the price realization of our margin increase. Our mills and box clients are positioned for strong second half performance following the impact of the winter storms and the significant maintenance outages in the second quarter. Replenishing our containerboard inventories will enable operational and supply chain efficiencies as we move through the second half of the year. We do expect further input cost inflation in the third quarter with the substantial pressure on OCC and transportation costs. Our teams are doing an admirable job managing costs in a tough environment. We expect further opportunities to be more efficient as inventory. In addition, our commercial initiatives are outpacing cost pressure and position us for strong margin expansion in the second half of the year.
Turning to Global Cellulose Fibers on slide eight. Demand for fluff pulp is solid and the end-use demand signal for absorbent hygiene products is healthy. Looking at our sequential earnings, price and mix improved by $104 million in the second quarter with price realization accelerating across all regions and segments as expected. Volume was moderately lower due to significant US port congestion and frequent vessel schedule changes, which delayed our shipments. Mill performance was strong.
However, operating costs were impacted by the tight supply chain environment. We expect these conditions to continue in the third quarter. Maintenance outage costs decreased as expected and input costs were moderately higher with lower wood cost in the Mid-Atlantic region offset by higher chemical and energy costs. Turning to Printing Papers on slide nine. Our papers business delivered earnings of $76 million in the second quarter with continued strong cash generation. Our Printing Papers business carries strong momentum as we approach the spinoff on October one and then continues to recover in all of our key regions.
Additionally, our volume recovery is outpacing the industry through the strength of our global brands and commercial excellence. Looking at the second quarter performance. Price and mix improved by nearly $30 million with price realization across all regions. Fixed cost absorption improved with no economic downtime in our North American mill system. However, operating costs were impacted by the tight transportation environment. We executed the heaviest maintenance outage quarter of the year as well. And on input costs, we experienced pressure on wood, chemicals and freight. As I said earlier, we're on track to spin off the papers business on October 1. Separation planning is progressing well and we expect to file the Form 10 with details of the spinoff in the first half of August. As you would expect, there is significant complexity.
Our teams are doing an outstanding job managing the business as we prepare for a successful separation. Looking at the Ilim results on slide 10. The joint venture delivered equity earnings of $101 million in the second quarter with an EBITDA margin of 47%, driven by strong price realization for pulp and containerboard. Volume improved sequentially on strong demand for pulp and containerboard as well as more shipping days in the second quarter following the impact of the Chinese New Year in the prior quarter. Underlying demand is stable following inventory restructuring during the first half of 2021. Shipping capacity is tight and supply chains to China are stretched.
Third quarter volume is expected to decrease moderately as Ilim executes the majority of its annual maintenance program. So now we'll turn to the outlook for the third quarter on slide 12. As Mark said earlier, we expect meaningful earnings and margin expansion as we move through the third quarter. Looking at Industrial Packaging, we expect price and mix to improve by $110 million on the continued realization of our March 2021 price increase. Volume in North America is expected to improve by $10 million while volume in Europe is expected to decrease by $10 million. Operations and costs are expected to improve by $5 million with the North American system benefiting from a gradual recovery and containerboard inventory levels.
Staying with Industrial Packaging, maintenance outage expenses are expected to be down by $122 million. Input costs are expected to increase by $85 million with OCC representing about 60% of the expected increase. In Global Cellulose Fibers, we expect price and mix to increase by $60 million on realization of prior price movements. Volume is expected to increase by $10 million. Operations and costs are expected to decrease earnings by $5 million on continued supply chain stress due to port congestion. Maintenance salaries expense is expected to decrease by $15 million. And input costs are expected to increase by $10 million on higher wood and chemical costs.
In Printing Papers, we expect price and mix to increase by $25 million. Volume is expected to increase by $5 million. Operations and costs are expected to be unchanged. Maintenance outage expense is expected to decrease by $23 million and input costs are expected to increase by $10 million primarily due to higher wood cost. And under the equity earnings, you'll see the outlook for our Ilim joint venture. I want to take a moment to update you on our capital allocation actions in the quarter. We're committed to maintaining a strong balance sheet. We're comfortable taking our leverage below the target range of 2.5 to 2.8 times debt-to-EBITDA on a Moody's basis. In the first quarter, we -- in the second quarter, we reduced debt by $796 million, bringing our debt reduction to $904 million in the first half of 2021. Returning cash to shareholders is a meaningful part of our capital allocation framework. In the second quarter, we returned $258 million to shareholders through dividends and share repurchases.
Share repurchases were $57 million, which represented one million shares at an average price of $60.80. We have about $1.5 billion available under the company's share repurchase optimization at the end of the second quarter. Lastly, in the second quarter, we monetized our remaining stake in Graphic Packaging for about $400 million. This brings our total cash proceeds on the investment to $1.3 billion before expected cash taxes of about $300 million in the second half of 2021. As a reminder, we also have a tax receivable agreement with Graphic Packaging, under which we expect to receive about $100 million in cash proceeds during the second half of 2021.
With that, I'll turn it back over to Mark.