UGL’s $330m Kemerton contract scrapped

Around 150 workers at CIMIC Group subsidiary UGL have been stood down at Albemarle’s Kemerton lithium plant expansion, with the contractor’s role on the project coming to an end.

The move to cut the workforce at Kemerton aligns with Albemarle’s commitment in January to lower costs, and confirms the deferral of the project’s fourth lithium hydroxide processing train.

The 150 contractor roles are in addition to less than 30 direct jobs lost on the expansion project, and reflects Albemarle’s desire to simplify its contract arrangements at Kemerton.

Business News understands Monadelphous, one of two lead contractors for at Kemerton alongside UGL, is placed to pick up full responsbility for the remaining deliverables on the project's third processing train - though no agreement has been struck. 

Monadelphous previously completed technical work on the project’s first two trains, understood to put it in the box seat as the sole contractor on the project going forward.

UGL was awarded a $330 million lead contractor role at the Kemerton expansion in August, covering structural, mechanical and piping works, electrical and instrumentation works, procurement and fabrication of piping and other items on trains three and four.

At the time, Albemarle’s vice president capital projects Australia Josh Rowan said the contract was one of the largest the company had ever awarded in Australia.

UGL’s contract award came weeks after Monadelphous also won lead contractor work worth around $200 million for work on the Kemerton expansion, covering front-end pyrometallurgy work.

Last Friday, Monadelphous revealed to the ASX it had received a letter of intent from Albemarle to make variations to its contract at Kemerton, “to include the provision of construction services for the hydromet works associated with Train 3 at the Kemerton expansion project”.

Meanwhile, the Kemerton project page on the UGL website no longer contains information about the project and redirects visitors to the home page.

“A revised contracting strategy is being implemented to reflect these previously announced decisions and to ensure we realise the capital savings reported to the market," a spokesperson for Albemarle said. 

“A single major construction contractor will take the Train 3 scope. Kemerton continues to focus on delivering safe production from Trains 1 and 2 which are not impacted by these changes.

“Australia remains core to Albemarle’s strategy and growth ambitions and an expanded Kemerton will be the largest and newest technology lithium processing facility in Australia.”

UGL’s parent company CIMIC Group has been contacted for comment.

A third contractor, Civmec, has also recieved contracts for civil and concrete works, the construction of carbon steel tanks and kilns at Kemerton. It is unclear if Civmec will be impacted by the changes. 

The move to scale back contractor involvement at Kemerton is a departure from the approach taken by Albemarle when its investment in train three and the stalled train four were announced in May 2023.

At the time, the project’s expansion was forecast to create 1,000 new jobs over the construction period, with trains three and four earmarked to increase the project’s operational workforce by 850.

The company embarked on a three-month contractor-focused recruitment campaign designed to attract prospective workers to UGL, Monadelphous and Compass Group, which will operate a workers village in Australind built by Grounded Construction Group.

In the months since, a dramatic downturn in the market for the battery metal has led the chemicals company to focus its attention on the delivery of a third processing train and the continued operation of trains one and two at Kemerton.

The scaleback at Kemerton followed a spate of project closures and curtailments in battery metals, in particular nickel, where an influx of Indonesian supply has impacted Australian markets.

Lithium producers have also battled, but Albemarle’s chief executive Kent Masters said in January that 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.