Management at Whakatāne Mill Limited (WML) broke the news to staff today.
The company told media there was no buyer for the mill and no viable option was found during the consultation process, and the decision was reached with a heavy heart.
The mill is Whakatane's largest private employer and has, for more than 80 years, produced paper and packaging products, mostly for export.
However, the volumes produced were "modest" by global standards, according to the company's general manager, and it could no longer compete.
The company will stop production on June 21 and then begin decommissioning the plant. The expected final closure date is June 30.
General manager Juha Verajankorva said it was a "very tough day for all of us".
Verajankorva said all staff at the mill would be made redundant, and most would complete their roles by the end of June. A small group would be retained to complete shut down and decommissioning work.
"We will work to do the best we can by our people and the community of Whakatāne and the Bay of Plenty as we complete our decommissioning and closure of the plant."
He said they would continue to work with union representatives and other agencies to support staff through the redundancy process.
A number of options are being explored for the plant and the site, but no decisions had yet been made, he said.
He said the management was grateful to all staff who had worked hard over many years, and contributed to the consultation process.
"We have explored several options in terms of considering how we might have been able to continue operations, but the economic reality of our position must be faced."
The closure marks the end of a significant production business in Whakatāne and the Bay of Plenty, and a further loss of capacity for New Zealand's paper production and exports.
The decision by parent company SIG Combibloc AG to source its liquid paper board from a lower-cost provider has meant the company would lose its major customer, accounting for 80 per cent of its sales, he said.
"This loss of customer, combined with the serious challenges that the operation has faced for some time, means that the operations are no longer viable.
"It's very tough, but SIG's decision is understandable, given the circumstances and the reality that we cannot compete with suppliers elsewhere. We accept that further investment in the business is just not feasible."
The mill had been producing paper and packaging products for more than 80 years but faced challenges from large-scale, new production sites, processes and facilities overseas, for a long time, Verajankorva said.
He said this "eroded" the competitiveness of their products.
Toi Eastern Bay of Plenty Development Agency general manager Karl Graodn said the news was "devastating" for those affected.
"What we're seeing here is not a symptom of challenges being faced at the Whakatāne mill alone, what we're seeing here are the implications of selling our raw lumber off-shore in a highly distorted market."
He said this meant the added-value sector found it "extremely challenging" to compete at an international level.
He said they were asking for Central Government and ministers to work with the sector to find a solution that encouraged an increase in value in New Zealand lumber.
He predicted this would be the "first of many" wood processors to close, as had been the case with timber.
"This is a symptom that's only going to accelerate throughout the country."
He said those who would bear the brunt would be the owners of forests, most of which were on Māori land in the Bay of Plenty, and 50 per cent of the mill's staff are Māori.
"This is a Bay of Plenty problem, this is a wood and forestry sector problem. We are fearful that this situation will disproportionately impact Māori above all others."
Whakatāne mayor Judy Turner said her thoughts immediately went to the staff and contractors affected.
"I don't think we can underestimate the impact of what this closure is going to have on our district."
It would be felt beyond those immediately lost their jobs, she said.
"The impacts on all sorts of businesses that have no direct relationship with the mill, but actually rely on the custom that the workers provide."
She said the council would work closely with Toi EDA and other agencies to explore the wider opportunities.
"One of the things we've learned is that opportunities often come with adversities; remain focused on exploring opportunities rather than throwing up our hands and walking away."
However, she said this did not take away from the severity of the situation for those directly affected and they needed to be supported.
She, too, was concerned about the wood-processing sector.
She said the questions need to be asked of the Government about what can add value to forestry products as well as the implications for those that own the trees and land.
E tū union spokesman Raymond Wheeler said the announcement of the closure was "devastating" for local industry, including businesses such as scaffolding and engineering.
"We've just had the economic impact of the Whakaari (White Island) eruption and Covid-19 on Whakatāne's tourism industry to contend with, and now the region has been dealt this blow.
"It's an enormous hit to the regions and to the eastern Bay of Plenty."
Wheeler said job opportunities in the area are limited, and emphasised the urgency around the Government's work on an Industry Transformation Plan (ITP) for the forestry and wood processing sector, if local manufacturing was to survive.
First Union transport, logistics and finance secretary Jared Abbott said the union was inviting potential buyers to come forward to make the most of the existing skills and infrastructure.
"There are opportunities in the industry and there is an important role for Government to play in securing the wood supply chain and increasing our manufacturing capacity."