The downturn in South Island stock numbers and increasing exports of preserved hides to China are being blamed.
The future of the site, often the subject of complaints about smells and effluent discharges, has yet to be decided, but the redundancies at the Graeme Lowe Otago fellmongery were effective immediately.
A long-time staff member, who declined to be identified, said workers were "stunned", as most believed restructuring that started two months ago meant only a downsizing was being considered.
He said further effects would be felt by trucking firms and through reduced effluent disposal.
The plant processed sheep, lamb, goat and calfskins and into salted skins, slipe wool, pickled and wet blue pelts, according to Lowe's website.
Managing director Andrew Lowe, of Hawkes Bay-based private company Lowe Corporation, yesterday said increased demand from China for salted pelts meant less processing of hides in New Zealand.
In 2005, the fellmongery underwent a $4 million upgrade, which was expected to lead to the processing of 3 million sheep and lamb skins - up from 1.7 million - with its 38 staff increasing to about 100.
New Zealand Meatworkers and Related Trades Union Otago Southland branch president Daryl Carran said most staff had a "reasonable level" of redundancy cover and the company "was not quibbling" over entitlements which would be paid tomorrow.
The union was told of a company "review" about three weeks ago, but the combination of exports, delivery issues and falling stock numbers ultimately "spelt doom" for the site, Mr Carran said.
Lowe Corporation, which has been in the meat industry for more than 40 years, operated three tanneries, two fellmongeries and two protein-rendering extraction plants, employing more than 500 people at peak-season times.
Mr Lowe said South Island stock numbers were down 4.3 million this year, with forecasts of another downturn next year. The only other South Island plant, at Christchurch, was not affected.
The closure comes after 380 jobs were lost from the Burnside and Silverstream meat plants during the past 18 months.
• The North Island's East Coast is reeling after nearly 200 layoffs were announced by two companies within days of each other, NZPA reported.
Yesterday, WPI International told 65 staff at its Prime Sawmill in Gisborne it would be closed, after a downturn in international prices and a continued high New Zealand dollar.
This followed an announcement by Gisborne food processor Cedenco at the weekend it was closing one of its factories, resulting in at least 125 seasonal workers losing their jobs.
