Local focus drives value at Kemerton

The word ‘lithium’ frequently appeared in reports as New York-listed Albemarle Corporation unveiled a staggering $US2.4 billion sales result across its global business in the June quarter.

The result was a 60 per cent increase on sales reported by the chemicals manufacturer in the corresponding quarter a year earlier, and attributed primarily to the commodity from which the lithium-ion battery takes its name.

It prompted Albemarle to increase its full-year net sales guidance by 40 to 55 per cent; now in a range between $US10.4 billion and $US11.5 billion.

“We remain confident in the long-term outlook for our businesses and are increasing our full-year net sales and adjusted Ebitda outlook based on the recent increase in lithium market prices,” Albemarle chief executive Kent Masters told the market.

The results are an endorsement of the economics that have underpinned Albemarle’s lithium investment globally over many years and go a long way to justifying its bullish approach to expansion within the lithium chemicals market.

With a population just more than 46,000, the port city of Bunbury may seem a world away from Wall Street, but it is here that Albemarle’s long-term Australian vision hinges on the ambitious doubling of the Kemerton lithium hydroxide plant.

At Kemerton, Albemarle was an early mover on downstream processing of the hard rock spodumene (the mineral containing lithium), which is abundant in Western Australia and in demand abroad.

The facility’s first two trains were built in joint venture with local mining success story Mineral Resources at a cost around $US1 billion and entered commercial production last year.

Kemerton’s third and fourth trains will belong solely to Albemarle and are expected to cost at least $US1.25 billion ($A1.97 billion).

Once complete, Albemarle and the state government say the plant will be the biggest and most advanced facility of its kind outside China.

But the economic climate that has contributed so strongly to Albemarle’s bottom line is creating new and localised issues for its management team on the ground in WA.

Riding a commodity revenue wave, the state’s economy remains strong.

In September, the number of Western Australians in employment reached 1.57 million, an all-time record which belies a slight lifting in the rate of unemployment to 3.8 per cent.

The unemployment jump came courtesy of a sustained migration influx, which has contributed greatly to the state’s population growth of 78,000 people over the course of a year.

But with population growth comes other challenges, including in housing, where a bottleneck in new home completions exacerbated by the pandemic is still reverberating through the real estate sector.

In August, rental availability was reported at 1.2 per cent in Bunbury; higher than in Perth but well short of the Real Estate Institute of WA’s 2.5 to 3.5 per cent measure of a balanced market.

At its peak, Kemerton’s expansion project will create as many as 1,000 new construction jobs across its contractors.

When up and running it will require a full-time workforce of 850.

Albemarle claims Kemerton will be the biggest and most advanced facility of its kind outside China.

Along for the ride

The briefest tour of Albemarle’s Perth offices reflects the company’s intention to maintain and grow its presence in WA.

Renovation is ongoing to modernise the facilities to accommodate a growing local office, but it pales in comparison to the billions spent, and to be spent, at Kemerton and beyond.

In July, Monadelphous was tapped to deliver $200 million worth of work on the expansion, having already worked with Albemarle in its construction and operation of trains one and two.

In August, UGL won a $330 million contract to source and manufacture pipes and other items for the expansion.

That contract also encompassed structural, mechanical, piping, electrical and instrumentation works.

Civmec was engaged in March to deliver civil works, tanks and kilns.

Hatch, Kerman, SRG Global and Worley have also been engaged for work on the plant at Kemerton.

Other notable contracts were those outside of the hydroxide plant.

In May, the day after stage two got the go-ahead, Albemarle awarded Grounded Construction a $140 million contract to build the Paris Grove workforce village at Australind.

The village will house as many as 850 people at a time, housing rostered workers and staffed by Compass Group under a $71 million contract for onsite catering, accommodation, cleaning, security, health and lifestyle, grounds services and facilities management.

Compass Group has committed to staffing the facility locally as much as possible.

While the tight jobs market means a drive-in, drive-out workforce will be inevitable, Albemarle capital projects Australia vice-president Josh Rowan said the company felt a responsibility to ensure it was delivering locally, and for local people, particularly those in Bunbury and its surrounds.

“We’ve done a lot of things as Albemarle to make our Kemerton plant top of mind,” Mr Rowan told Business News.

“We want it to be something that people hear about, think about, know about, and to be a company that people in the South West are excited to come work for.

“That’s a true statement whether they’re going to join our operations and manufacturing workforce, or whether they’re our construction contractors engaged to help us expand the plant.

“Across all fronts, we really want to hire as many local people as we can.”

Paris Grove village is not Albermarle’s first attempt at getting worker accommodation across the line.

The company scrapped plans for a separate $73.4 million village at Binningup in June after extensive community and council opposition to its plans.

“While approved by planning authorities, finalisation of conditions has proved difficult in a timeframe viable to meet company needs,” the company said in a statement.

Mr Rowan said despite the setback at Binningup, Albemarle was proud of where the company landed on its plans for Paris Grove.

A community reference group is offering Albermarle guidance on its accommodation plans to ensure it meets the expectations of local stakeholders.

“The accommodation village is meant to be able to take some pressure off the local market, so we don’t occupy everything that’s down there and take away from a tourism industry and other types of people who want to come to the South West,” Mr Rowan said. 

“We’re really trying to be a responsible operator, and this village is a step in that direction.

“Longer term, we’ve designed it in a way where we could take those construction-type accommodations and replace them with houses; we’ve designed it in a way that over time we could transition it from an accommodation village to a permanent residence.”

Collaboration

The job market was tight during the construction of Kemerton’s first two processing trains, which took place over the course of the pandemic.

As the economy strengthens, Albemarle and its contractors face an even tighter job market as they push ahead with doubling the facility’s output capacity.

To assist in securing the workforce required to deliver the expansion, Albemarle has taken the step of running a digital and radio recruitment campaign.

Rather than spruiking Albemarle directly, the campaign highlights the work of its contractors and the opportunity at Kemerton.

Mr Rowan said the approach was designed to support the contractors and help them succeed against the headwinds of a tight labour market.

“There’s been so many interesting stories around people who have seen our advertising campaign,” he said.

“Compass, who’s going to help us operate the accommodation village, I believe their executive chefs saw the campaign and were excited by it and have applied to be part of it; we’re excited to have them on Albemarle’s expansion team.

“We’ve had some great interest from Monadelphous and UGL, too. They’ve been watching those figures tick over in terms of the interest level of people looking at the project.

“Collectively, as an expansion project, we’re recruiting a lot of really great talent to come and work in the South West, alongside local talent.”

Compass estimates the campaign generated 200 local applications for jobs at Paris Grove in its first week, with 132 in the second.

“Prioritising local employment is crucial and we’re thrilled to have received over 400 applications for jobs at Paris Grove, with many of these local applications coming from Australind, Eaton Bunbury and the surrounding areas,” Compass executive director John Sheridan said.

“Having completed an online information session and interviewed 40 candidates to date, we are excited to build a great village community where local residents such as our newly appointed head chef play a key role.”

For Monadelphous, which already has a 250-strong workforce in the South West and invested $6.5 million into local businesses last year, the campaign has been a welcome development. 

“It’s been great to collaborate with Albemarle on their local South West recruitment campaign to provide employment opportunities in the local area, and we’re proud to be part of it,” managing director Zoran Bebic told Business News.

“Monadelphous was involved in the construction of the initial pyromet plant for Albemarle, and we’re looking forward to growing our relationship well into the future in the rapidly emerging lithium market.”

Albemarle is also engaging with local entities around traffic management and telecommunications needs in a bid to lessen its disruption to the surrounding communities.

Lessons

Kemerton’s first phase was designed with expansion in mind, allowing Albemarle to deliver processing trains three and four without major disruption to existing facilities.

Major construction on trains three and four is expected to begin before the end of the year.

Mr Rowan said the company had learned lessons from its experience on the initial Kemerton facility across all aspects of its project delivery, including the negotiation of an enterprise agreement with unions to set common working conditions for the construction of the project.

“We didn’t have that the first time around and I think it will be a big benefit to the project this time that we have that common agreement and we have it early, so our contractors are able to incorporate all aspects of that agreement as part of that recruitment,” he said.

Preparation has been a priority, with the company planning out its workflow to minimise delays such as those that affected Kemerton’s initial construction, attributed at the time to workforce shortages.

“We’ve thought very intentionally about how we want to design our construction sequence on the project so that we maximise the productivity and the efficiency of the construction workforce,” Mr Rowan said.

“We really learned that from [trains] one and two, thinking about how we make sure we have the materials and equipment, drawings and everything in place so the construction workforce can be productive.

“That starts with doing the project safely, and that safety leads to productivity and ultimately a good project in the end.

“I think we’re proud of what we did on Kemerton one and two, but we want to get better all the time.”

Despite the focus on continual improvement, he said the existing Kemerton facility was operating “where we wanted it to be”, as the company continued work to ramp up the asset.

“It’s going through, just as you would with any other processing plant,” he said. “We’re working overtime to get it to where it’s at nameplate capacity.”

Kemerton’s third and fourth processing trains will take the plant’s capacity to 100,000 tonnes of lithium hydroxide per annum.

The first train is expected to be operational by 2026.

The same year, a strategic agreement with Ford Motor Company for the supply of more than 100,000 metric tonnes of battery-grade lithium hydroxide over five years will come into effect.

And while Albemarle has abandoned its efforts to acquire Kathleen Valley lithium project developer Liontown Resources for $6.6 billion, it hasn’t walked away from mining altogether, maintaining its non-operating 49 per cent stake in the Greenbushes lithium mine near Bridgetown.