The Whakatāne district mayor says closing down the Whakatāne Mill would be a big blow for the town.
The mill employs just over 210 staff and has produced paper and packaging products, latterly mostly for export, for more than 80 years.
Its Swiss owner, SIG, last night announced plans to close the facility. It said the mill had faced the loss of its biggest customer and the plant was longer economic.
Whakatāne Mill general manager Juha Verajankorva said under the proposal all staff at the mill would be made redundant, the plant decommissioned and the site remediated.
"This is a hard proposal to put forward, given how much a part of the Bay of Plenty community this company has become. Should closure proceed, we will do everything we can to support our people and all our stakeholders," he said.
Mayor Judy Turner said the impact on the community would be substantial, due to so many household incomes being affected.
"I guess like the rest of the district we're pretty stunned and a bit shocked.
"This is quite serious."
Judy Turner said more raw logs were being exported overseas instead of the focus being on exporting value-added products, putting the wood fibre processing sector under pressure.
Turner said she would try to speak to officials in central government about whether there was any support or solutions available.
"I'm certainly keen to ask some questions around [this] and talk to people in Wellington ... because I think there's a wider implication."
Eastern Bay of Plenty Economic Development Agency general manager Karl Gradon also wanted central government to find solutions that would allow for the facility to keep operating.
He said the Whakatāne Mill produced packaging for some of the world's leading food brands. High grade folding box board for the food service and retail packaging was in increasing demand and the global trend away from single use packaging was accelerating demand, he said.
"This technology is highly aligned with the government's own strategy of removing single use plastics from circulation."
He said in many cases the wood processing sectors received significant subsidies from their governments which made competitive production in New Zealand a significant challenge.
"This is despite New Zealand's competitive advantage of having one of the world's largest sustainable plantation forests and renewable energy."