The Kurri Kurri smelter may cut production as workers refuse to delay a pay rise for a year.
It comes as the smelter, run by Hyrdo, is set to slash around 50 jobs, around 10% of its work force.
Union reps will meet with Hydro CEO Alberto Fabrini as the company struggles against falling aluminium prices, contract problems and the carbon tax, the Newcastle Herald reports.
Australian Workers Union secretary Richard Downie said a ballot had been held, rejecting the company’s call for a pay rise delay until October 2012.
Following the dismissal of Hydro’s request, the refiner put forward another of options for the upcoming year.
According to the Herald, the unions says these options include a partial or total closure of one of Kurri Kurri’s three potlines, or not putting pots back into service if they are removed for maintenance.
Fabrini dismissed the statements as "speculative".
However, he did reiterate Hydro’s dismal financial situation.
"Unfavourable currency and decreasing global aluminium prices are things we need to mitigate to secure the smelter’s viability," Fabrini said.
"We also have an unsolved situation over long-term power contracts for the smelter."
The smelter has reportedly lost about $20 million in the last few years.