The outlook for the Kwinana industrial strip has changed drastically during the past year after a series of project closures and delays.
Twelve months ago, the Kwinana industrial area just south of Perth was grappling with the pending closure of Alcoa’s alumina refinery.
Alcoa’s news followed the 2021 closure of BP’s giant oil refinery, which was the industrial strip’s original anchor tenant when it opened in 1955.
These closures, however, were poised to be offset by a wave of new projects in sectors such as energy, lithium, biofuels and hydrogen.
In a feature published in Business News last February, it was noted that most of the new ventures “are yet to prove their technical or commercial viability”.
Those words have proved to be prophetic because, 12 months on, many of those ventures have hit trouble.
But the news isn’t all bad.
A couple of billion-dollar projects are close to completion and several smaller projects are under way (see graphic).
However, the overall theme is that there is much less investment and fewer jobs than anticipated a year ago.
Big closures
For its part, Alcoa is continuing with the phased ‘curtailment’ of its Kwinana refinery, in line with plans announced last year.
It still employs about 240 people at Kwinana, but that is down from 1,000 when the refinery was fully operational.
It also continues to export alumina from its Pinjarra refinery through its port facilities at Kwinana.
Employee numbers will fall to about 50 in the third quarter of this year when the company completes the curtailment.
A second big closure this year was BHP’s nickel refinery.
The mining giant had invested more than $100 million in the refinery in recent years in order to meet the needs of battery manufacturers.
However, the dramatic downturn in nickel prices last year made almost the entire Australian nickel industry unviable, resulting in the closure of mines and processing facilities. Another major project to hit the skids has been the Tianqi Lithium refinery.
The Chinese company’s original plan at Kwinana was to build four processing trains, with each producing 24,000 tonnes of batterygrade lithium hydroxide per annum. Trains 3 and 4 were dropped years ago.
Production at train 1 started in 2022 but Tianqi and its joint venture partner, IGO, have been battling to get it working efficiently.
It produced just 3,508 tonnes in FY24. While the joint venture is persisting with train 1, it decided in January to cease all works and activities on train 2.
ASX-listed IGO, which owns 49 per cent of the refinery, recently quantified the high cost of this venture when it announced a $525 million impairment against the value of its stake.
A fourth big project going through a rocky period is East Rockingham Waste to Energy, which was placed in the hands of administrators and receivers last October.
While construction of the plant was believed to be very close to completion at the time, the receivers from FTI Consulting nonetheless suspended all work and terminated the contract of engineering and construction contractor Acciona.
There has subsequently been a great deal of legal and financial manoeuvring, with FTI and Acciona facing off in the Supreme Court.
Acciona subsequently strengthened its hand by buying out the other secured creditors in the project, after which FTI was replaced, initially by PwC and then by Cor Cordis.
It remains to be seen how quickly these changes will get the project back on track.
Originally budgeted to cost $511 million, the East Rockingham facility is believed to have cost at least $800 million and is upwards of two years overdue.
Assuming it gets completed and fully commissioned, it will process up to 300,000t of municipal and commercial waste and produce 29 megawatts of electricity per year.
Success stories
The problems at Tianqi and East Rockingham have not deterred the proponents behind two very similar projects.
Covalent Lithium, jointly owned by Wesfarmers and Chile’s SQM, is close to completing its lithium hydroxide refinery.
Last month, Wesfarmers said it had achieved good progress at the refinery, with construction 95 per cent complete as at the end of December and commissioning 64 per cent complete.
Chief executive Rob Scott said the joint venture was still focused on its original plan to build an integrated lithium mine, concentrator and refinery.
“Our plans are still very much aligned and on track with what we originally proposed,” he said.
Covalent is expected to produce its first lithium hydroxide in the middle of this year.
The overall venture, including the mine and concentrator in the Goldfields, is budgeted to cost $2.5 billion.
Kwinana Energy Recovery (formerly Avertas Energy) has had a bumpy development path but is making good progress on its waste-to-energy plant.
It has many similarities to East Rockingham: it is believed to be well over its original $700 million budget and well behind schedule.
The key difference is that KER has remained solvent, in part because Acciona – which, once again, is the engineering contractor – bought out its co-investors.
KER has advised the facility was currently in its final commissioning phase.
“KER is operational up to ninety-five per cent (single-day basis), having diverted around 67,000 tonnes of waste from landfills to date,” the group told Business News.
This has been a lengthy exercise, with first waste was delivered to the facility last June and the first ‘fire on grate’ (start of processing) in September.
Once fully commissioned, it will process 400,000t of waste per year and 38MW of power.
The waste-to-energy sector is new in Australia and KER’s plant has spawned further investment.
KER has partnered with WA Limestone and Blue Phoenix to repurpose its incinerator bottom ash (IBA): the residual material that remains after waste is treated in the W2E plant.
To date, KER has processed 15,000t to Blue Phoenix, including ferrous and non-ferrous metals.
Blue Phoenix invested $11 million establishing Australia’s first IBA plant, near Kwinana.
Its plant removes metals and transforms the residue into a sustainable source of aggregates that can be used for construction and civil engineering projects.
This reduces the volume of waste that goes to landfill while also reducing the need for quarried virgin materials.
Blue Phoenix has built Australia’s first plant for processing incinerator bottom ash.
Blue Phoenix Australia managing director Ian Lynass believes aggregates produced from IBA will play a role in road and civil construction.
“Current collaborative work with industry peers and regulatory bodies is very encouraging in practice, yet much work still needs to be done to create the fully circular approach,” Mr Lynass said.
New energy
Oil and gas producers BP and Woodside Energy had been expected to play a big role in leading new investment at Kwinana.
BP, in particular, was seeking to revive its shuttered oil refinery site with two ambitious projects.
This included a $600 million biofuels refinery, to be followed by the $1 billion-plus H2Kwinana hydrogen facility.
BP announced last month the biofuels refinery had been “rephased” and, shortly afterwards, said it was scaling back its investment in new energy sources globally.
The company says it is still doing planning work for H2Kwinana and other potential projects in Australia, but they do not appear to be a priority.
Similarly, Woodside’s growth projects have included the H2Perth hydrogen and ammonia facility.
Like other oil and gas producers, Woodside has shifted focus back to its core products.
Another ambitious project that was touted for Kwinana was a battery materials facility, proposed by IGO and Wyloo Metals.
The downturn in the nickel industry quickly put paid to that plan, which never progressed far beyond a concept.
BP’s decision to defer its biofuels refinery may adversely affect the chances of a canola (oilseed) crushing plant being built in the Kwinana area.
Both US grain trader Cargill and Australian agribusiness GrainCorp had been evaluating the possibility, with Cargill securing an option to lease a parcel of land next to CBH’s grain terminal.
The crushing plants were likely to cost about $500 million.
The biofuel refinery was seen as a likely offtake customer that would strengthen the business case.
Both companies were keeping their options open when contacted by Business News last month.
“Cargill continue to work through the project planning approvals and have an option on the required land,” a company spokesperson said.
“The BP announcement further demonstrates the importance of policy clarity and support for the emerging biofuel industry that is critical in Australians decarbonisation journey.”
Graincorp indicated its plans were not affected by BP’s decision, with the ASX-listed business considering Western Australia among several states for an oilseed crushing plant.
The demolition of chimney stacks at Synergy’s old Kwinana power station illustrates the energy transition.
Kwinana Industries Council chief executive David Harrison said recent decisions underscored the long road towards the energy transition.
“It highlights the challenges of global trading conditions at the moment, along with the uncertainty of the path to decarbonisation and alternative fuels,” he said.
The KIC has been pushing for upgrades to roads, rail lines, energy networks and other infrastructure to help the area realise its potential.
“It’s not just the KIC saying this,” Mr Harrison said.
“The government’s own Western Trade Coast strategy identified the need for critical common-user infrastructure upgrades.”
He said proposed multi-billion-dollar investments at Henderson and Rockingham to support the defence sector, along with the Westport development, reinforced the need for coordinated planning.
Under way
One neat illustration of the changes happening comes from developments at Synergy’s old Kwinana power station, which operated from the 1970s to 2015.
Removal of two prominent chimney stacks at the state-owned utility, well-known landmarks of the Kwinana skyline, has started.
Synergy acting chief executive Kurt Baker said the demolition of the stacks was part of end-of-life decommissioning and demolition of the old power station.
“Synergy’s Kwinana location is a microcosm of the energy transition,” he said.
“The site not only has an old coal-fired power station that is being deconstructed, but also is the home of two of Synergy’s renewable battery energy storage systems and three gas turbines.”
The removal process involves erecting a bespoke mast climber platform.
“The platform is being used in conjunction with small excavators, to progressively deconstruct the concrete and brick structures inwards, which will ensure no impact to the surrounding area,” Mr Baker said.
The project is expected to be completed by the end of 2027.
Wesfarmers, which is one of the largest employers in the Kwinana industrial strip, has delivered a mix of good and bad news this year.
Excluding its Covalent Lithium joint venture, Wesfarmers Chemical Energy and Fertilisers (WesCEF) has about 800 employees working at its various facilities in Kwinana.
That number will shrink slightly after WesCEF told customers last month its Kwinana superphosphate manufacturing plant was being put on care and maintenance.
In much more positive news, WesCEF and joint venture partner, chemical company Coogee, announced last month they would proceed with the expansion of their sodium cyanide production hub in Kwinana.
The expansion means their joint venture, Australian Gold Reagents (AGR), will lift capacity by 30 per cent and become one of the biggest sodium cyanide producers in the world.
The project is believed to cost about $200 million.
AGR general manager Barney Jones said the expansion would enable the business to meet the growing demand for sodium cyanide for the goldmining industry around the world.
The WesCEF project follows several other developments in the area, with Cockburn Cement close to completing a $420 million upgrade.
On a smaller scale, property developer Birchmead kicked off construction of a $70 million bulk fertiliser distribution centre for Nutrien Ag Solutions late last year.
It began nine months after Nutrien Ag’s existing facility at Kwinana was damaged by fire.
Another company planning to invest in Kwinana is Melbourne-based Ecocycle.
It plans to spend $5 million building a mercury ‘retirement’ plant and later this year will spend a further $7 million on a battery recycling plant.
A very big opportunity for the area comes from the NeoSmelt consortium, comprising steel producer Bluescope and miners BHP and Rio Tinto.
The consortium is evaluating construction of an electric smelter ironmaking pilot project at Kwinana.
After evaluating options across the country, the consortium announced in December it had settled on a 15-hectare site in Kwinana.
That choice was helped by a WA government commitment to contribute $75 million to the project, which does not yet have a price tag but is likely to be in the hundreds of millions of dollars.
The proposed plant would test technology to enable the use of Pilbara iron ore in the manufacture of iron without the need for blast furnaces, in an effort to decarbonise steelmaking.
If it gets legs, the Kwinana plant would aim to prove Pilbara ore could be used to produce lower-carbon molten iron with the hope of fetching a green premium for the product.
It hopes to produce between 30,000 and 40,000t per annum of molten iron from 2028, initially using natural gas before looking to hydrogen.
The joint venture will begin feasibility studies on the plant in the second quarter of this year, targeting a final investment decision in 2026.
