Saudi Arabia is planning a second lithium processing facility as it ramps up efforts to work with Western partners to develop its battery supply chain.
The facility, which will use raw materials mined in Austria to produce refined lithium hydroxide for BMW, is a sign of how supply chains to process the metal are slowly developing outside of China.
China accounts for nearly 60 percent of global processing of lithium, a critical ingredient in electric car batteries – and the EU and US are stepping up incentives to create more capacity.
Australian-listed lithium start-up European Lithium and Saudi industrial conglomerate Obeikan Investment Group are each taking a 50 percent stake in the plant. The facility will cost $350 million-$400 million and will likely produce its first lithium hydroxide in 2026.
European Lithium will supply the processing plant with lithium ore, known as spodumene, from the mine in southern Austria.
“Much of the world is afraid of what would happen if China stopped its (lithium) exports,” said Tony Sage, executive chairman of European Lithium. “It would be a disaster for the energy transition.”
For Saudi Arabia, the project is the latest in a series of deals aimed at strengthening its role in electric vehicle production and the battery supply chain – part of broader efforts to diversify beyond oil revenues.
Earlier this year, Saudi Arabia signed an agreement with EV Metals, an Australian battery manufacturer, to develop a lithium hydroxide plant that will begin production in 2026.
Lithium processing is very energy intensive and Sage said Saudi Arabia was an attractive location for a processing facility due to its cheap energy.
Saudi Arabia aims to produce 500,000 vehicles a year by 2030, including those produced in the country by US-based Lucid Motors, in which the state fund, the Public Investment Fund, acquired a majority stake.
Lucid, which has struggled in recent years, said Wednesday it would raise $3 billion in an equity offering, with 60 percent of the money coming from the PIF.
The wealth fund, which is chaired by Crown Prince Mohammed bin Salman, has also started its own electric vehicle manufacturer, Ceer, which plans to produce 170,000 vehicles a year, in partnership with Foxconn and BMW.
The lithium hydroxide produced by the European lithium plant will be sold to BMW as part of an existing supply agreement. European Lithium will supply 9,000 tons of lithium hydroxide annually to the car manufacturer from 2027.
Even as the West struggles to secure lithium resources, prices for the metal have fallen nearly 50 percent since the beginning of this year – though still above the average of the past three years.
European Lithium said the total investment requirement for the construction of its Austrian mine and nearby ore concentrator, as well as for the development of the Saudi plant, would be between $800 million and $900 million. It plans to get a second listing on the Nasdaq in the coming months through a dedicated acquisition company or blank check merger.