Sumitomo Metal Mining Co., Japan’s largest nickel producer, said yesterday it might delay the start of its $2 billion Taganito nickel project in the Philippines to explore the possibility of cutting project costs.

The company had planned to start construction of a 30,000 ton-a-year nickel plant together with Taganito Mining Corp., in 2009 after completing a feasibility study by the fall of this year. The plant in Surigao del Norte was to start operations in 2012.

"We will spend more time on the feasibility study so that we’ll be able to obtain better terms and conditions on materials and various other contracts," Nobumasa Kemori, president of Sumitomo Metal Mining, said in a news conference.

The global credit crunch has boosted finance costs and pushed economies into recession, cooling demand for metals around the globe.

Sumitomo’s announcement marks the global credit crunch’s first project casualty in the Philippines

Nickel futures have dropped 15 percent to $12,850 a ton in the past month.

Kemori said a global surplus in nickel, widely used in kitchen appliances and cutlery, would balloon to 100,000 tons in 2009.

Sumitomo Metal, however, has no plan to abandon its growth strategy and will stick to its midterm plan to nearly double its nickel output capacity to 100,000 tons a year by 2013, he said.

The company will look into mergers and acquisitions in the electronics materials business and further investment in copper mines if opportunities arise, he said.

The $2 billion nickel project would have made the Philippines contribute more than five percent of total world output in three years.

Sumitomo’s local partners are Taganito HPAL Nickel Corp. and Nickel Asia Corp. Earlier, Sumitomo Metal Mining organized Coral Bay Nickel Corp. with Mitsui & Co., Sojitz Corp. and Rio Tuba Nickel Mining Corp. to produce 11,000 tons of nickel a year in Palawan.