The consultation began at the North Yorkshire-based company on 15 September. Rigid Paper said it would focus on the "difficult trading conditions" facing the business and, if an agreement is reached, it will propose to close the operation during January 2009.

Mill manager Phil Woolley said the decision to open consultation is a consequence of the "unprecedented volatility" in the energy markets experienced by the business throughout 2008.

He said: "During this period, average prices have increased by around 145% as compared to the same period in 2007.

"Despite significant capital investments, the operation has continued to become progressively less economic."

Rigid Paper manufactures paper for packaging. It said its corrugated division would not be affected.

In the 2007 financial year, Rigid Paper's output was 70,000 tonnes and its turnover was £5.4m.

Rigid Paper is part of the Rigid Group and a subsidiary of VPK Packaging Group. It said it would continue to focus on its core strength in the UK as a corrugated container manufacturer.

VPK Packaging Group is a Belgian packaging group with 26 companies in 12 European countries.