Norske Skog has confirmed it will close one of its two newsprint machines at Kawerau's Tasman Mill.
The closure is likely to happen early next year, reducing newsprint capacity at the mill by 150,000 tonnes, half its current output. The mill currently has about 300 employees so substantial job losses are expected.
In a statement, the company said the exact timing and estimates of the number of employees affected would not be clear until a consultation process with employees was completed.
Tasman Mill general manager Peter McCarty said the decision to close a machine was driven by falling demand and unfavourable exchange rates that made large scale exports to Asia unprofitable. He said the mill would remain an important employer in the region and would continue to produce newsprint for the New Zealand, Australian and Pacific Island markets.
Norske Skog's regional president Andrew Leighton said the closure was disappointing but unavoidable.
"We will now focus our attention on future growth opportunities for the mill in the area of renewable energy. A major investment in geothermal energy is well underway at Tasman and further investments in other projects are planned over the next few years," Mr Leighton said.
The machine closure is part of a new strategic direction in Australasia announced by Norske Skog which is aimed at transforming the business from being wholly a newsprint producer to being the Australasian leader in publication papers and renewable energy.
Mr Leighton said $84 million would be invested at Australia's Boyer Mill over the next two years to convert a newsprint machine to the production of coated paper suitable for catalogues. The Australian federal government will contribute $28 million in grants to help fund the project and the Tasmanian government is providing a $13 million loan.
Mr Leighton said the conversion project, which will begin immediately, was a key component of the new direction for the business.
He said eight to 10 additional jobs would be created in the coating operation and in the mining and transportation of fillers as well as the creation of 100 construction jobs.