Nearly 80 jobs could be lost at Falmouth docks under plans to restructure the yard.
Ship repair company A&P Falmouth has just begun a 30-day consultation with staff and unions about the proposals.
The company currently employs 305 people, along with around 80 casual staff.
Managing director Peter Child said there a need to temporary reduce the workforce by up to 78 people was “unavoidable”.
He said: “It’s never an easy decision to reduce our workforce and we will work with our staff to provide what support we can to those affected.
“We also see this as a temporary situation because we have two major RFA refits scheduled for 2015 and that will mean having to take more people on when those contracts start.
“We are also committed to investing in our future needs and still intend to take on five new apprentices this year.”
The yard had already reorganised its operations management team to make it more focused on the commercial market for the next 18 months.
He blamed the repair cycle of the yard’s Ministry of Defence contracts combined with a depressed commercial shipping market and continued delays to the dredging of Falmouth Harbour to allow access by bigger vessels.
He said MOD work accounted for over half of the yard’s business.
Although it had recently finished a multi-million pound refit of Royal Fleet Auxiliary Argus , employing 200 staff for six months, the next major refit was not scheduled until April 2015.
And the sale of RFA Largs Bay to Australia in 2011 means there are only four ships in a five year cycle.
Coupled with this, he said A&P lost out on a major contract to refit ocean survey vessel HMS Scott for September this year.
Mr Child said the lack of progress on the dredging project was affecting the company’s ability to access one of the few growth markets - repairs of bigger ships berthed alongside rather than in dry dock.
This he said, has led to the yard turning work away.
He said: “Although we have a MOD contract for the long term maintenance of RFA ships until 2018, the repair cycle means we are facing a big gap before the next refit, and the commercial market is still hand-to-mouth.
“We have been doing everything in our power to bridge that gap and we put in a very competitive bid for HMS Scott, so were disappointed not to win it.
“But what is more frustrating is the continued delay to the dredging.
“Ships are getting larger, creating a growing market for alongside repairs that do not require dry docking.
“We are ideally placed to do that work except for the fact that we can’t get the ships in because we need a deeper channel.
“Only last week a large LNG vessel in the bay that required major repair work had to be turned away because she was too deep for Falmouth.”