About 10 jobs are to be shed from Cavalier Spinners Ltd in Awatoto near Napier.
The news of the loss of about 22 jobs from the Cavalier sites in Awatoto and two Auckland mills was announced yesterday by First Union.
The plant currently employs 150.
While farmers have celebrated the high price of wool, the yarn and carpet industry has suffered a downturn in demand.
The building industry has suffered the biggest dip in demand in living memory and the Christchurch rebuild has taken a lot longer than anticipated, lessening demand for carpet.
Norman Ellison Carpets, 70 per cent owned by Cavalier, is making 20 workers redundant at its Onehunga yarn mill next week, the union statement said.
Robert Reid, general secretary of First Union, said both companies also announced they were shutting down for a week around Labour Day.
"Cavalier's main competitor, Godfrey Hirst, had already lost 120 jobs at its Christchurch yarn plant as a result of its destruction by the Christchurch earthquake earlier this year," Mr Reid said.
"Other yarn makers in New Zealand have also notified the union that their orders are down and the union would not be surprised to see further job losses at other mills."
Carpet and yarn makers are quoting the increase in the price of wool from $3 per kg to $7 per kg as being the killer for the industry, he said.
"While the increase in wool prices may be good for farmers it is making woollen carpets uncompetitive. Some carpet makers are moving to synthetic carpets because of the price of wool.
"What is happening in wool is very similar to what is happening in New Zealand wood processing.
"First Union has been dealing with a rash of closures and redundancies in wood processing plants over the last couple of months.
"Industry sources from both wool and wood tell us that the reduction of new house starts from an average of 22,000 to 12,000 last year is crippling both industries.
"Both industries were looking forward to the increase in demand from the Christchurch rebuild. However the rebuild seems further and further away every day."
The exact details of how many jobs would be lost in Awatoto were still being worked through by Cavalier Bremworth management.
Mr Reid told Hawke's Bay Today, "my understanding is there are around 10 jobs going in the plant in Awatoto."