The facility, 21 kilometres out of Nelson, was built in the 1980s.
Nelson Mayor Nick Smith said Carter Holt Harvey, which owned the plant, wanted to shut it to consolidate its resources at its Kawerau plant in Bay of Plenty.
He told RNZ that the plan was under consultation until September 1, but following a meeting with the company’s management he was not optimistic that anything could be changed.
“I put to them was there anything that council or government could do that would save the local jobs, and they made plain not really.
“It was really that consolidation of their timber manufacturing business in New Zealand that was driving the closure of the Nelson plant so disappointingly.”
Regional Development Minister Shane Jones and South Island Minister James Meager were briefed on the matter by Smith, he said.
“They were obviously disappointed but also were supportive of ensuring government agencies like [Ministry of Social Development] are there and available to provide the support for the very significant number of workers and families that will be affected if this closure proceeds.”
Smith said he had spoken to half a dozen workers.
“They are absolutely gutted. Some of them have just purchased homes and are now desperately worried about how they are going to meet those mortgage repayments.”
The forestry company planned to make a final decision on September 4, he said.
