Albemarle scales back Kemerton plans

The dramatic downturn in the battery metals sector has forced US company Albemarle Corporation to slash spending, with one casualty being the planned expansion of its Kemerton lithium refinery.

Albemarle announced last night it would focus construction at Kemerton on the third production train, implying it would defer construction of train 4.

The about-face comes eight months after the US company said it would spend between $US1.25 billion and $US1.5 billion on building two additional processing trains at the refinery, near Bunbury.

That would have lifted capacity to 100,000 tonnes per year and made it one of the biggest lithium hydroxide producers outside of China.

First production was anticipated in 2026.

It is believed less than 30 Albermarle employee roles will be directly affected by the company's new plan, which is likely to have a larger impact on contractors that have recently won work on the expansion project.

Albemarle has previously disclosed about 1,000 workers would be needed on the expansion project, with most engaged by contractors.

These include CIMIC Group subsidiary UGL, which recently won a $330 million contract for structural, mechanical and piping works; electrical and instrumentation works and associated procurement and fabrication of piping.

Monadelphous won a $200 million contract for front-end pyromet structural, mechanical, piping, and electrical and instrumentation works associated with the two new processing trains.

Civmec has been awarded three contracts, including for civil and concrete works, the fabrication of 25 carbon steel tanks and the manufacture of kilns.

Albemarle’s announcement last night said it would complete commissioning activities for Trains 1 and 2 at Kemerton.

That comes as no surprise as it has already spent in excess of $2 billion building the first two trains and will be keen to get them working efficiently.

Albemarle announced a suite of other measures to cut spending across its global operations.

It plans to prioritize permitting activities at the Kings Mountain spodumene resource, defer spending at the Richburg mega-flex lithium conversion facility and defer investment for its technology park in North Carolina.

The company said it would limit sustaining capital spending to the most critical health, safety, environmental, and site maintenance projects.

It also plans to slash operating costs by $US95 million annually, primarily related to sales, general, and administrative expenses, including a reduction in headcount and lower spending on contracted services.

Last night’s announcement came shortly after it emerged that broking firm JP Morgan was seeking to sell Albemarle’s $125 million stake in one-time takeover target Liontown Resources.  

Albemarle had been planning to spend $6.6 billion buying Liontown – a price that was set just a few months ago when the outlook for lithium and other battery metals was much more positive.

There has been a dramatic fall in the lithium price in recent months reflecting slower than anticipated growth in demand as sales of electric motor vehicles failed to meet high expectations.

The weakness recently prompted ASX company Core Lithium to halt mining activities at its Finniss lithium project in the Northern Territory.

The downturn has affected other battery metals such as nickel, which has also seen a sharp price decline this year.

Canadian company First Quantum Minerals and the administrators of ASX company Panoramic Resources both announced this month they were halting production at their WA nickel mines.

Albemarle CEO Kent Masters said the long-term fundamentals for its business remained strong.

"The actions we are taking allow us to advance near-term growth and preserve future opportunities as we navigate the dynamics of our key end-markets," he said.