Albemarle CEO Issues Stark Warning on WA Lithium Refinery Costs
Kent Masters, the chief executive of US chemical and lithium giant Albemarle, has delivered a blunt assessment of the economic challenges facing the company's operations in Western Australia. During a recent visit to Perth, Masters stated that Albemarle would require Western buyers to begin paying a premium for its lithium hydroxide before considering restarting the Kemerton refinery, which was suddenly idled due to high operational costs.
Cost Disparity with Chinese Competitors
In a detailed briefing to analysts, Masters highlighted a significant competitive disadvantage. He revealed that refineries in China are currently producing the crucial battery-making input for approximately $US4 to $US5 cheaper per kilogram compared to Western Australian operations. This cost gap, according to Masters, is unsustainable and "going to have to be addressed" to develop new, resilient supply chains outside of China.
"We need differentiating prices to cover those costs from the West and we've not been able to get that support so far," Masters explained when questioned about the lithium price threshold needed to resume operations. "Really the thing we're looking for is probably a bifurcation, where Western prices are different than prices in China. That's really what we're looking for and to see that sustainable over time to cover those costs."
Financial and Employment Impacts of the Closure
The decision to idle the first processing train at the Kemerton facility carries substantial financial and human consequences:
- Albemarle anticipates a cost of approximately $US100 million from the closure.
- The company reported a net loss of $US414 million for the December quarter.
- Earnings before interest, depreciation, and amortisation for its energy storage segment fell by 8 per cent to $US697 million, attributed to lower lithium market pricing.
- The shutdown will result in 250 redundancies for local workers, a development described as "disappointing" by both WA Premier Roger Cook and Federal Resources Minister Madeleine King.
Government Support and Persistent Challenges
Masters acknowledged that Albemarle has "made progress" in securing support from both the Federal and Western Australian Governments to mitigate costs. Initiatives such as the lithium industry support program and forthcoming production tax credits, scheduled to commence in 2027, have been offered as incentives. However, Masters stressed that a "still a gap there" remains between operating costs in WA and those in China.
The CEO specifically identified several high-cost areas burdening the operation:
- Tailings disposal
- Labour expenses
- Energy costs
Political Response and Calls for Allied Support
In response to the Kemerton closure, WA Premier Roger Cook defended his government's ongoing support for the lithium industry while issuing a call to action for international partners. "It's important that our trading partners also step up and support mineral processing capacity in places like WA so the minerals we mine can be sold through new supply chains," Cook stated.
This sentiment aligns with broader diplomatic efforts. Federal Resources Minister Madeleine King was recently in Washington, engaging in talks with US and other allied counterparts. The discussions focused on developing strategies to counter China's current dominance in the global critical minerals market, underscoring the geopolitical significance of establishing alternative, secure supply chains.
