Georgia-Pacific announced Tuesday that it will close its hardboard plant in Duluth at the end of the month, putting 141 employees out of work.
Company spokesman Eric Abercrombie said the company will likely transfer production of the product to other facilities, including a plant in Phillips, Wis.
"The decision was made after a thorough review in seeking to optimize our business and manufacturing operations," Abercrombie said. "We're looking at the long-term vision for the Georgia-Pacific wood products division as a whole."
Employees will be paid for 60 days after the plant shuts down.
The news came as a disappointment to Mayor Don Ness, who said in a statement that the company previously had assured him it would keep the plant open.
"We will start working immediately to support new operations at the plant," Ness said. "Meanwhile, our focus will be on the work force that will be displaced. This is unfortunate and untimely news for our community."
The plant makes a product called Superwood, a specialty wood used to make car interior components including visors and rear shelves.
Wayne Brandt, executive vice president of Minnesota Forest Industries and the Minnesota Timber Producers Association, said the closure continues a trend in Minnesota.
In the last five years, he said six large wood-consuming mills have shut down. Earlier this month, Verso Paper announced it would not reopen its paper mill in Sartell after a Memorial Day fire.
Brandt said those mills accounted for about one-third of the state's wood usage as of five years ago.
Over the past five years, the state's wood usage has dropped from about 4.1 million cords to fewer than 2.7 million cords.
"There's a tremendous impact obviously on the workers that have lost jobs, on the loggers that supply them wood, and the other businesses and employees that supply other products and services to those companies," Brandt said.
Brandt said the Georgia-Pacific plant also provided an important market for low-quality timber.
The Associated Press contributed to this report.