Carter Holt Harvey is closing two plants in South Australia. Ninety four employees will lost their jobs.
The company blames the high cost of logs for the closure.
The ABC reports a support package from the state government was turned down by the company.
Treasurer Jack Snelling offered $A27 million in order to help save jobs, but it was rejected because Carter Holt Harvey did not believe it addressed long-term industry issues.
Forestry SA board chairman Ian Kowalik said negotiations with Carter Holt Harvey had been unsuccessful.
"What they have demanded is way below what the market price of timber is and the level that they want means that growing trees is not sustainable," he said.
Carter Holt Harvey is owned by Graham Hart.