Carter Holt Harvey's medium-density fibreboard plant at Tasmania's Bell Bay has told most of its 95 staff to take two weeks' leave while its future is assessed.
The Pine Panels plant suffered millions of dollars in damage from a fire last week.
CHH wood products chief executive Jim Snelson told
the Hobart Mercury standing down the staff would enable the company to determine damage.
The future of the plant had been the subject of industry speculation since the Tasmanian Government provided it with a substantial rescue package after it was revealed the plant was losing A$1 million ($1.24m) a month.
The plant had rarely been profitable after being built for A$130m by Japanese firm Hokkushin in the mid-1990s and then sold to CHH for A$45m in 2002, the newspaper reported.
The Pine Panels plant processes about 280,000 tonnes of pine a year for revenue of A$70m, but has been hurt by a strong Australian dollar, spiralling world oil prices and the high cost of wood.
Its closure has left Tasmanian softwood suppliers Auspine, Forest Enterprises Australia and Branxholm Sawmill with substantial stockpiles of woodchips.
The woodchips could be diverted to Gunns Ltd which is seeking 320,000 tonnes of pine for use in its proposed Long Reach pulp mill.
Mr Snelson said the fire caused substantial damage in the plant's press area and the main body of the plant was inoperable.
"Obviously with the main part of the plant inoperable there isn't the requirement for all employees to be at work," he said.
"We have decided to suspend operations for at least two weeks which will allow the assessors to estimate the damage to plant, equipment and buildings."
- NZPA
