Alcoa (AAI) will close its Point Henry aluminium smelter in Geelong in August at a cost of around $160 million.
In a statement, the group said it would also close two rolling mills that employ about 480 people by the end of 2014, including an adjacent mill in Geelong and a mill in Yennora, New South Wales.
A review of the smelter, where around 500 employees work, found it has no prospect of becoming financially viable.
Total restructuring charges associated with the closures are expected to be between $250 million and $270 million after tax, with cash costs during 2014 expected to total around $160 million.
The two rolling mills serve the domestic and Asian can sheet markets which have been affected by excess capacity, Alcoa said.
Chief executive officer Klaus Kleinfeld said despite the hard work of local teams, the assets are no longer competitive and are not sustainable now or in future.
"We recognise how deeply this decision impacts employees at the affected facilities and are committed to supporting them through this transition," Mr Kleinfeld said.
Alcoa will actively seek a buyer for its Anglesea coal mine and power station that supply around 40% of the Point Henry smelter's power needs, saying it has the potential to operate as a stand-alone facility after the smelter closes.
The Portland aluminium smelter in Victoria and the bauxite mining and alumina refining operations in Western Australia will continue normal operations.
Vic govt to work with Alcoa workers
Victorian premier Denis Napthine said aluminium production rates have outstripped demand, making it hard for the 50-year-old Port Henry smelter to compete.
"The combination of the high Australian dollar and very competitive world market for aluminium and aluminium products have made their business not viable in Geelong," Dr Napthine told reporters.
"We'll certainly be working with Alcoa and the workers during this transition phase."
Treasurer Joe Hockey says the closure of Alcoa's Geelong aluminium smelter is disappointing but predictable.
"It's disappointing but it was certainly predictable because in 2012 Alcoa did an analysis and said the plant was not financial viable," Mr Hockey told reporters in Sydney.
He said the $40 million given to Alcoa by the previous Labor government was money "down the tubes".
The carbon tax had added to the cost of production and the closure gave further weight to the argument that Labor should support the tax's repeal in parliament, Mr Hockey said.
"It's a massive cost on aluminium smelters, and a 50-year-old smelter with a carbon tax is never going to be cost-effective," he said.
The treasurer said the government had no "silver bullets" to boost industry but would put in place the right tax and regulatory settings to create jobs.
Asked whether he had a message for Alcoa workers, Mr Hockey said: "I feel for you. This is a sad day for you and for others but there is a new dawn - it must get better and it will get better."
AWU Victorian Branch Secretary Ben Davis said it was an awful day for the workers and the Geelong community.
"(The workers) have co-operated and implemented productivity improvements and workplace change whenever it was asked of them, and their reward for all that blood, sweat and tears is to lose their jobs. It is a shameful announcement," he said in a statement.
"This closure is not about wages and conditions, or government assistance, it's all about the high Australian dollar."
Mr Davis called on the Victorian and federal governments to step up and provide an Economic Assistance package to Geelong as a matter of urgency.
AWU NSW Secretary Russ Collison said more than 400 jobs would be lost with the closure of the Yennora plant in western Sydney and it was devastating news for a region already reeling from job losses.
"The AWU has done everything in its power to save these jobs," Mr Collison said.
"Both federal and state governments need to urgently put their shoulder to the wheel and develop a jobs plan for manufacturing in western Sydney," Mr Collison said in a statement.
"Let's be very clear - this closure is not about wages and conditions. The AWU has always made job security its number one priority."
Geelong has recently been impacted by job losses at workplaces such as Ford, Target, and Qantas at Avalon Airport.