Forestry and wood processing company Junken New Zealand has proposed halving cutting the staff at its Matawhero mill from 200 to 100.
General manager David Hilliard said it had to restructure because of declining demand in Japan for plywood and structural LVL building products.
"The Japanese housing market has been in decline and future demand for these products is not expected to improve because of the ageing population in Japan," Hillard said.
The company was also struggling to compete globally with large-scale wood-processing plants in China and South America.
"All of our people have worked hard over the past five years to stay competitive, including increasing our New Zealand and Australian sales to reduce our reliance on the Japanese market, invested in a form-ply plant and reduced costs and hours of operation, " he said.
However, the business hasn't been able to produce product at the price required by customers.
He said staff are now being consulted and if the changes go ahead in Gisborne, the mill would stop producing plywood and LVL products and reduce the manufacture of veneer.
The company is also changing what it makes at its Wairarapa mill, increasing production of its "J-frames" for the New Zealand housing and construction market and decreasing the specialist products for the Japanese building market.
These changes won't result in job losses for any of Juken's 222 permanent staff in Wairarapa, Hilliard said.
First Union president Robert Reid called the restructure a "bitter blow" for the workers.
"Although this is a proposal for consultation at this stage, we all know that companies don't make such proposals unless they're serious about them," Reid said.
Reid said the loss of the jobs would have a "devastating" effect on the workers and the community.
"Lots of families have multiple members who work at the mill. For others, although wages aren't great, it's the difference between being in poverty or not," said Reid.
Reid also pointed blame at the previous government.
"Each year three million tonnes of raw logs leave the Gisborne wharf, the result of the last National Government's neglectful, market-driven, hands-off approach," Reid said.
"The downsizing of the JNL mill would see even more raw logs and therefore jobs shipped overseas every year."
Reid called for the current government to intervene.
"Before the election Labour promised to create more jobs in the region's wood sector, announcing a $20 million proposal to establish a prefab mill in Gisborne. Fast-tracking this and other job creation proposals must be a priority," said Reid.
Feedback on the consultation will close on February 7 and a final decision will be announced to staff on Monday February 12.