Opal Australian Paper will withdraw from producing graphic paper at its Maryvale mill in Victoria's Latrobe Valley, sparking 200 job losses.
White paper production at the mill was impacted in December after state-owned supplier VicForests was ordered to scale back harvesting in parts of Victoria.
"The company and Opal has been considering alternative wood supplies in order to continue graphic paper operations," Opal's Japanese parent company Nippon said in a withdrawal notice.
"But has concluded that alternative procurement is not feasible and has decided to discontinue the graphic paper business at the MV Mill."
The Victorian Supreme Court found VicForests failed to adequately survey logging coupes for two protected possum species, in a decision it is appealing.
Production workers were stood down but kept being paid until the middle of this month under a Victorian government guarantee.
Nippon expects to post a $21 million loss from the closure of the mill, which opened in 1937 and is one of the region's largest employers.
The Construction, Forestry, Maritime, Mining and Energy Union blamed the early end of Australian white paper production on the Victorian government's mismanagement of the sector and Opal's bumbling approach.
"Both the government and the company failed to take the actions we implored them to take in border to prevent this disastrous outcome," CFMEU manufacturing division national secretary Michael O'Connor said.
"The closure of white paper production at Maryvale means the loss of 200 jobs in the Latrobe Valley region, devastating families and communities."
Australian Manufacturing Workers Union Gippsland organiser Steve Dodd said Opal wanted to make 32 of its maintenance workers redundant.
It, along with the Electrical Trades Union, plan to take the company to the Fair Work Commission over a lack of consultation on redundancy numbers.
"It's been an absolute farce," he told AAP.
"We've asked for a whole range of information. They just come back bulls***ing to us.
"We believe some accountants in the Melbourne office just went 'right, one-third less operating capacity, one-third less workforce'. They haven't genuinely tried to mitigate the impact."
Office Brands saw the closure coming after the mill started winding back operations.
They've been sourcing paper internationally, and are calling for an end to white paper import tariffs given there's no longer an Australian industry to protect.
"I don't think anyone else is going to set it up in Australia unless they get the same level of protection that Opal had from the federal government," chief executive Adam Joy said.
"The paper is going to continue to be more expensive, especially while the tariffs are in place."
The Victorian Greens have seized on the mill's imminent closure to call for an immediate end to all native forest logging, ahead of the state's scheduled deadline of 2030.
The Victorian Forest Alliance said the mill had driven the decline of threatened species for decades and a 30-year contract with Nippon to supply woodchips from Victorian native forests until 2030 was never going to be sustainable.
"Businesses don't want it, the Victorian public certainly don't support it, and now the Andrews state government must act to rapidly end native forest logging and support workers to transition immediately," campaign co-ordinator Chris Schuringa said.
The Victorian government said it would work with the company to minimise redundancies and was offering support services to affected workers.
"We stand with Opal workers at this difficult time," a government spokeswoman said.
The ETU has been contacted for comment.
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