Western Australian job losses dent Australia's green ambitions

MELBOURNE (Reuters) - A downturn in the critical minerals sector that has triggered a wave of job losses in Australia's top earning resources state has also struck a blow to the country's hopes to build out a critical minerals processing sector.

Top lithium producer Albemarle on Thursday announced around 300 redundancies at its lithium hydroxide plant in Western Australia, where it paused an expansion as part of a "comprehensive review" of its cost and operating structure, in the latest job cuts to the sector.

Australia is known for being the world's largest iron ore exporter but it also supplies around half of the world's seaborne lithium used in batteries and is a major supplier of other battery materials like nickel.

Miners have now announced job cuts equivalent to 2% of the sector's state workforce in July alone, according to a Reuters tally, roughly doubling cuts announced in the first half combined. The have also mothballed or delayed plans for new projects that would feed into the energy transition.

"Australia's critical minerals industry is in a critical state - energy costs, labour, productivity, red tape," said analyst Daniel Morgan of investment bank Barrenjoey.

"It sounds good on paper but it's not clear the settings are in place for it to work. All of this reinforces how uncompetitive Australia is in downstream processing."

BHP Group, IGO, Albemarle and Fortescue have all been expected to benefit from Australia's moves to shore up its economy for the green transition.

But they have been hurt by slower than expected electric vehicle take-up that has hit nickel and lithium prices, as well as persistently high power and labour costs.

Australia has harboured big dreams to become a critical minerals and green energy powerhouse.

It in May released a budget centrepiece of A$22.7 billion ($15 billion) to boost domestic manufacturing and renewable energy, which included a A$7 billion investment in processing critical minerals under a "Future Made In Australia" banner.

The plan also included tax breaks for processors of critical minerals, which is set to start in 2027, and which the government is now considering bringing forward, Resources Minister Madeleine King told ABC Radio in Perth on Thursday.

"This is complex problem, and it is impacting international markets across the critical minerals sector globally," she said separately in a statement.

Battery metals producer IGO said last month that given "prevailing market conditions" it would pause a study into developing a facility that would produce precursor battery chemicals near Perth.

BHP said is stopping battery chemicals output at its Kwinana nickel refinery, which was set to supply Tesla while Fortescue cut jobs amid concerns it would not meet its green energy production targets.

"Australia’s mining sector is now at an inflection point as the energy transition and global decarbonisation efforts changethe shape of overall demand," BHP said in a submission to an Australian enquiry last week.

The cost of mining operations in Australia has increased "acutely" in the past few decades while labour productivity has remained flat. To boost competitiveness, the country needs to upskill its workforce, streamline permitting and support new projects by developing common infrastructure, it said.

($1 = 1.5309 Australian dollars)

(Reporting by Melanie Burton; editing by Giles Elgood)