January 24, 2007
Australia's tight labour market proving costly for Alcan expansion
MONTREAL
Challenging market conditions have forced Alcan Inc. to raise its cost estimate for upgrading its Gove alumina refinery in northern Australia for the second time in four months— increasing the bill to US$2.3 billion.
The major aluminum firm had initially pegged the cost at $1.5 billion, but that estimate was increased to about $1.9 billion last September.
In addition to increasing the project’s cost, Alcan has delayed its startup date until the second quarter of this year, from the first quarter.
“Despite extremely tight market conditions in Australia for labour and materials, the project will deliver positive results by significantly improving Alcan’s cost position and capacity in alumina,” stated Jacynthe Cote, CEO of Alcan’s bauxite and alumina division.
The refurbishments will increase the refinery’s capacity to 3.8 million tonnes a year from 1.8 million tonnes in 2006.
The new timeline will see expanded production ramp-up starting progressively during the second quarter of 2007.
The delay is a disappointment, said several analysts, but should have little financial impact on the aluminum giant.
“Relative to the size of the company, I think it’s unfortunate but I don’t think it’s that critical,” said Ian Howat of National Bank Financial.
He said these kinds of delays are happening to many companies in the hot Australian labour market. There are too few workers spread out among many large-scale projects.
Lawrence Smith of Blackmont Capital said the significant cost overrun will lead some to question whether the controls are in place to manage a large-scale project.
“The answer is probably no,” he said in an interview. “We’re in a fairly unique time period here.”
Last September, Alcan warned of a 20 to 25 per cent boost to the project’s cost because of a tight construction market and a worldwide commodities boom.
It had claimed to have offset the cost increase with “more innovative strategies.”
Most plant components were fabricated and pre-assembled in low-cost countries and shipped to Gove for installation.
CANADIAN PRESS
| MOST POPULAR STORIES |
- Police probe death at York Street construction site
- Ontario’s apprentice ratio dispute continues to be split along union, non-union lines
- Hard Rock contracting companies fined over worker injuries
- Early LEED advocates were ‘pioneers,’ ACEC president says
- Two Ontario firms win Canadian Architect Awards of Excellence
- 20 Most Popular Stories
| CURRENT STORIES |
- EllisDon keeps moving up at the Ritz-Carlton
- Insulation association lobbies for inclusion of best practices in National Building Code
- AGC survey finds two-thirds of U.S. non-residential construction companies plan layoffs in 2009
- Bulldozer fatality halts work at Anatolia Minerals’ Copler gold project
- Canadian economy heads south for the winter
- Homicide charge laid in N.Y. crane collapse
- McKay-Cocker chooses Viewpoint software to integrate operations
- Great Lands digs deep at the Mona Lisa
- U.S. investors drop stakes in proposed TransCanada pipeline
- Aecon named one of Canada’s 10 Best Employers
- Solar module maker Day4 Energy lays off 95 workers
| ALEX’S BLOG |
Reed Construction Data Chief Economist Alex Carrick discusses current developments in Canada's economic environment. He also shares light-hearted reflections on life and current events.
Economics Blog More 
- Spotting the U.S. and Canadian Recoveries – Earliest Indicators (January 6, 2009)
- TYBA Projects (January 5, 2009)
- Ottawa’s Spending and Canada in Afghanistan (December 30, 2008)
Lifestyle Blog More
- The Perils of Driving in the White Stuff (December 29, 2008)
- Economics Humour – Take my Dismal Science, Please (December 22, 2008)
| PROJECT NEWS BRIEFS |
Updates on Canadian construction projects from Reed Construction Data’s research team. More
- Vanbots begins work on Thompson Rivers University’s House of Learning (Jan 6, 2009)
- City of Thompson plans new water treatment plant (Dec 30, 2008)
- Quadrangle Architects begins working drawings for new phase of Downtown Markham development (Dec 16, 2008)
- Designs for new Corrections Canada office set to begin (Dec 15, 2008)
- Haastown Holdings ready to accept subtrade pricing for Waterscape phase one (Dec 15, 2008)
