Incitec Pivot has announced it will defer development of its planned ammonium nitrate plant at Kooragang Island, in Newcastle for two years.
It comes only days after the plant, which would be built near Orica's existing ammonium nitrate plant, faced fierce criticism from local community groups.
Residents at nearby Mayfield and Stockton have already come out in arms over the proposed $600 million plant.
Despite environmental studies stating that it will fall within existing standards, the Stockton Community Action Group believes it poses a high risk.
"Incitec have blatantly ignored our requests to locate the plant elsewhere," Group spokesperson Keith Craig said.
"Nowhere in the world will you find two explosives plants, operating side-by-side, less than 800 metres from residents and three kilometres from a central business district. Governments and the Environment Protection Authority should not allow it."
According to the company it has "suspended its feasibility study on the development of an ammonium nitrate manufacturing complex at its Kooragang Island site in Newcastle.
It went on to state that "the decision on whether to proceed with the development has been deferred for at least two years, reflecting the anticipated reduction in demand for ammonium nitrate and the high cost of construction in Australia.
At this time "the project has not met Incitec's financial hurdles.
'The $17 million cost of the feasibility study will be expensed in the 2012 financial year."