More than 250 Victorian wood mill workers face an uncertain future with the country's largest hardwood mill and timber product manufacturer set to close.
Australian Sustainable Hardwoods told its 250 staff members on Thursday significant lay-offs will begin by September if negotiations with their supplier don't produce a better deal.
The company said VicForests - the state-owned logging company - was not offering enough timber supply to keep the mill operating.
"For our business to be viable we need to have a consistent volume through," the company said in a statement.
"The offer of 80,000 cubic metres is too far short of the minimum 130,000 cubic metres we need to operate a viable business."
But VicForests says the level of supply needs to be reduced to help ensure the ongoing sustainability of the industry.
'Any future sales agreement offered to ASH will be based on lower supply levels to ensure this aligns with available timber resources," VicForests said in a statement on Thursday.
ASH director Clinton Tilley met with VicForests on Thursday and was told he would get half of the current annual sawlog supply contract over the following three years.
Regional Development Minister Jaala Pulford is set to meet with ASH in the next few weeks.
She said VicForests has an obligation to manage the state's resources in a "sustainable and responsible manner".
ASH says the only way the mill will be able to stay in business is if negotiations resume.
"The only thing that will change that outcome is if the government have timely and genuine negotiation with ASH to supply the required volume," Mr Tilley said in a statement.
ASH says the Heyfield Mill contributes to about 7000 jobs in Melbourne, including small businesses and suppliers.
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