Kruger Inc. idled one of its papermaking machines at its Corner Brook mill in March, and now says the shutdown will continue indefinitely. (CBC)

Papermaking giant Kruger Inc. said Wednesday it has no choice but to idle one of the machines at its newsprint mill in western Newfoundland.

Kruger had shut down the No. 4 machine at Corner Brook Pulp and Paper in March for what was to have been an eight-week period. The machine, though, has not operated since, and on Wednesday the company told employees that the shutdown will continue indefinitely.

Two machines at the mill will remain active.

The shutdown of the No. 4 machine means the loss of 130 jobs, 70 at the mill itself and 60 in forest operations.

"Unfortunately, the newsprint market continues to deteriorate and is not expected to improve in the coming months," Jean Majeau, Kruger's senior vice-president for corporate affairs and communications, told CBC News on Wednesday.

Majeau said that while Kruger had until now been able to avoid laying off workers who have been attached to the No. 4 machine, it can no longer maintain the same workforce.

"The market conditions are getting worse than ever," he said.

"We're not able to justify all the employees that were concerned by the operations of the No. 4 machine."

Asked if the layoffs could be considered permanent, Majeau said, "I need to point out that the Kruger business model for Corner Brook remains based on a three paper-machine operation."

However, he said, Kruger's "priority today is to ensure the competitiveness of the two remaining machines."

Workers had been bracing for the news through the week.

Kruger idled the mill's No. 4 papermaking machine in March to cope with slumping demand for newsprint.

Production at the mill has been well below normal levels this year.

Province to provide help

In the meantime, Newfoundland and Labrador Premier Danny Williams said his government is prepared to provide money to help the mill survive the current crisis in the forestry industry, after meeting with union leaders Wednesday.

"There's no numbers put on the table from a perspective of … 'government, give us a cheque for this amount of money.' But [what] we have said is that we're prepared to play our part quite simply as we always have in any of these situations," Williams said.

"Our primary concern at these times is always the workers, the workers who are affected right now. And this mill needs to stay viable and competitive and needs to stay alive. And that's what we're discussing."

Williams said he expects work will start in the next few weeks on a committee where the union, the company, and government ministers will try to hash out solutions for the mill.

Corner Brook Mayor Charles Pender said the mill is vital for the regional economy.

"There's about 600 direct jobs down there and who knows how many indirect jobs — woodworkers, contractors and everybody else who depend on the mill," Pender told CBC News.

Canada's newsprint producers have been shedding jobs and cutting capacity in an effort to stay afloat.

In March, AbitibiBowater permanently closed its century-old mill in Grand Falls-Windsor, and has been fighting bankruptcy in U.S. and Canadian courts.

Stephen Atkinson, an analyst with BMO Capital Markets, said even though demand for newsprint is down by a third, privately owned Kruger Inc. is in better shape than its competitors, and that Corner Brook Pulp and Paper can target overseas markets.

"The company can ship into Europe, so provided the dollar doesn't go too high, so they should be fine. Certainly they are and were the lowest cost of the Newfoundland mills," Atkinson said.

Atkinson said Kruger will try to increase revenue this summer with a price increase of $50 per tonne.