The world's largest lithium producer will cut jobs and pause part of its expansion at its refinery in Western Australia's south, in a bid to reduce costs and optimise cashflow.
Key points:
- Albemarle has deferred plans for a fourth lithium processing train at Kemerton refinery in WA
- It will also slash costs by approximately $95 million annually
- Lithium has experienced a price slump of more than 80 per cent over the past year
American lithium giant Albemarle, which runs the Kemerton lithium downstream processing plant north of Bunbury, has deferred plans to build a fourth lithium hydroxide processing train.
Instead, it will shift focus to the construction and completion of other projects at the refinery.
The company also confirmed the pause would result in job losses but did not say how many employees would be affected.
In a statement released on Wednesday, Albemarle said it expected its 2024 capital expenditures to be down from $2.1 billion in 2023 to between $1.6 billion and $1.8 billion.
The US giant revealed the cost cuts would allow it to focus on projects that were "significantly progressed, near completion and in startup".
In 2023, the lithium company said it would double its production at the Kemerton site, adding two extra trains, and doubling the amount of lithium hydroxide able to be produced for electric vehicles.
"Actions we are taking allow us to advance near-term growth and preserve future opportunities," Albemarle chief executive Kent Masters said in a statement.
This decision could signal another setback in the critical minerals sector with job losses and mine curtailments for Ravensthorpe nickel, Panoramic nickel, and the suspension of Core Lithium's mines in the Northern Territory.
Demand for lithium has dropped by more than 80 per cent in the past year and nearly 11 per cent in the past month alone.
Albemarle flagged last November the softening in prices could dent 2023 sales, describing the drop as a "road bump".
Expert weighs in
Analyst Romano Sala Tenna said the move would have little impact on the global supply of the critical mineral, as the fourth train was a relatively long-term prospect.
However, he said it would impact industry sentiment and send a message to the market regarding lithium prices.
"It doesn't have any impact on the short to medium-term supply outlook," he said.
"But it sends more of a price signal to the market about where lithium carbonate and hydroxide needs to be to incentivise new supply."
Mr Sala Tenna said the announcement was a blow to the Australian sector's efforts to establish itself as a "genuine manufacturer" of battery and electric vehicle grade chemicals.
He also pointed to a slower-than-expected uptake of electric vehicles in North America and Europe, but predicted this would change in the coming years.
"2025 will be a watershed moment Europe; North America is probably going to lag," he said.
"But we will see later this decade, early next decade, some catch-up from North America."
Mr Sala Tenna said Albemarle's broader global operations would not be affected and said the announcement was an indication of "prudent capital management".
Looking ahead, he said major announcements from the industry's players were unlikely as the sector would likely "wait and see" and hope for improved lithium prices.
Editor's note: This story has been updated to make it clear the expansion plans have been scaled back, rather than halted.