US-based Albemarle will shut down parts of its Kemerton lithium hydroxide operation, a move that impacts 300 local jobs and contractor Monadelphous.
US-based Albemarle will shut down parts of its Kemerton lithium hydroxide operation, a move that impacts 300 local jobs and contractor Monadelphous.
Albemarle will stop construction activities at the third lithium hydroxide processing train and idle production at train two, placing the unit into care and maintenance.
It will instead pivot its focus to manufacturing efforts on the continued ramp and qualification of train one at the operation in the South West.
The move impacts 300 local jobs, with 460 workers to be retained, marking another major blow for the battery metals industry amid weak prices and demand.
Albemarle expects to wipe $US900 million to $US1.1 billion off the value of the WA asset in its third quarter 2024 results.
It already recorded a $US215 million charge in the second quarter of 2024, tied to halting construction on train four and other capital project asset write-offs and contract cancellation costs.
Deferring the construction of the fourth lithium hydroxide processing train impacted 150 workers at CIMIC Group subsidiary UGL, which was contracted at Kemerton.
UGL was awarded a $330 million lead contractor role covering structural, mechanical and piping works, electrical and instrumentation works, procurement and fabrication of piping and other items on trains three and four.
The other lead contractor on site, Monadelphous, was notified its contracts at Kemerton have been terminated following Albemarle’s decision overnight.
Monadelphous estimates it will be out of pocket about $200 million from the termination of the contracts reducing its work-in-hand.
Its Kemerton work would have generated between $75 to $85 million in revenue by the end of FY25. The overall scope of work was up to 20 per cent complete.
Monadelphous was conducting the front-end pyromet works for the two new lithium processing trains and a multidisciplinary package for the utilities and reagents scope.
It previously delivered construction packages on the first two processing trains and also had maintenance and sustaining capital projects contracts at the Kemerton operation.
Civmec has been engaged at the operation through multiple contracts, but it is not affected by Albemarle's announcement.
It comes after Albemarle launched a review of its cost and operating structure after announcing it was cutting spending across its global operations earlier this year.
Albemarle was previously planned on constructing the two additional trains at the refinery near Bunbury, to bring it to four trains, which would have made it one of the biggest lithium hydroxide producers outside of China.
The cost of building those additional trains would have been in the order of between $US1.25 billion and $US1.5 billion, which would have lifted capacity to 100,000 tonnes per year. Each trains adds 25,000 tonnes.
Overnight, Albemarle said the review would help it maintain its "competitive position throughout the cycle" as it "navigates end-market challenges, primarily in the lithium value chain".
"The long-term growth potential for our end markets remains strong, and we plan to leverage our core capabilities while ensuring we remain competitive," Albemarle chief executive Kent Masters said.
"Given the dynamics of the global markets we serve, we must be able to pivot and pace as necessary to maintain our leading position."
Federal Resources Minister Madeleine King said Albemarle's decision underlined the continuing volatility of international critical minerals markets.
She said her immediate concern was for the workers and the local community impacted by this decision.
"Market concentration and volatility in demand has caused extreme price changes in lithium markets, including an 80 per cent fall in lithium hydroxide prices over the last 12 months," Ms King said.
"This is complex problem, and it is impacting international markets across the critical minerals sector globally.
"Current conditions in lithium markets highlight the importance of policy support for Australia's critical minerals sector to help address distortions in global markets and secure opportunities for Australia to be a key supplier of high quality refined critical minerals.
"The decision underlines the need to provide significant support to our critical minerals sector."
Shadow Energy Minister Steve Thomas said the decision was not surprising given the volatility of the lithium market over the past year.
“It has been a tough time for lithium producers across the board, with the current price around a third of the money producers were getting a year ago” he said.
“Despite the strong long term prospects for lithium, the volatility that exists makes it difficult for companies to plan and budget in the short term.
“The good news is that demand and price are expected to recover over the next couple of years, and the units that are being put into care and maintenance will be able to be restarted.”
