Port of Newcastle confirmed on Tuesday that Infrastructure NSW had advised them the $12.7 million in state funding for the key piece of regional infrastructure was off the table.

"While disappointed construction of the terminal facility cannot proceed at this time, we respect that funding is no longer available," Port of Newcastle said in a statement.

"Port of Newcastle will continue supporting the Hunter's tourism sector by berthing cruise ships in port and coordinating the many wonderful volunteers dedicated to welcoming visitors to our city."

The terminal project hit the rocks in June last year when a stand-off emerged over the price of construction.

Port of Newcastle said it was unable to build the planned terminal within the state funds set aside two years earlier. Outgoing Port of Newcastle chief executive Geoff Crowe confirmed at the time he had sought "less than $4 million" in additional funds.

Within months, the government ruled out spending more on the project.

In February, it emerged that home port capability was unlikely to be included if the terminal proceeded.

The project's trouble deepened in March when then Parliamentary Secretary for the Hunter Scot MacDonald indicated the government could withdraw the money from the project first announced in September 2016.

"The Port of Newcastle has come back to us about some changes, including about not being a home port. We have to run the ruler over that," Mr MacDonald said at the time.

"Infrastructure NSW has to be consulted about whether they would accept fairly significant changes, and the usual problem with Infrastructure NSW is they are very reluctant to take on changes."

Hunter tourism advocate Will Creedon said in March the stand-off and delays to building the terminal had already risked the city's standing with the cruise industry.

"We've dropped the ball," he said.

"The community is at a loss and we're going to lose out in the long run."