Electric Vehicle Supply Chain Developments in Saudi Arabia
Saudi Arabia is making headway in developing its battery supply chain as it prepares to open its second lithium processing plant using raw materials mined in Austria. The move is also a sign of how supply chains for metalworking are gradually developing outside China, which currently accounts for nearly 60% of global lithium processing. The Saudi plant will produce refined lithium hydroxide for BMW, which will acquire 9,000 tonnes of the material per year from the facility when production begins in 2026.
Saudi Arabia’s Lithium Hydroxide Plant Development
The lithium hydroxide plant is a joint venture between Australian-listed start-up European Lithium and Saudi conglomerate Obeikan Investment Group, with each acquiring a 50% stake in the facility. The plant will cost an estimated $350-400 million. While European Lithium will supply lithium ore, also referred to as spodumene, from its southern Austrian mine to the plant, cheap energy made the processing plant a more attractive location in Saudi Arabia. The kingdom plans to produce 500,000 vehicles per year by 2030, including those made by US-based Lucid Motors, which is now under the control of the country’s sovereign wealth fund, the Public Investment Fund. Lucid will benefit from an equity offering set to raise $3 billion, with 60% of the funds coming from the Saudi fund.
Saudi’s Broader Efforts to Diversify Beyond Oil Revenues
Saudi Arabia has been signing agreements designed to strengthen its role in electric vehicle battery manufacturing, with the aim to diversify beyond oil revenues, part of a wider economic transformation plan called Vision 2030. Earlier this year, Saudi Arabia signed a deal with EV Metals, an Australian drums manufacturer, to establish another lithium hydroxide plant, which will begin operations in 2026. The asset fund behind the project is chaired by Crown Prince Mohammed bin Salman; it has also launched its electric vehicle manufacturer, Ceer, in partnership with Chinese firm Foxconn and BMW.
The Rise of the Lithium Supply Chain
With electric vehicle sales shooting up in recent years, the demand for battery metals like lithium became high. Despite the push for Western nations to secure lithium resources outside China, prices have fallen almost 50% in just 2021. However, they remain higher than the average for the past three years. Europe’s Lithium start-up said its total outlay for the construction of its Austrian mine and mine concentrator, as well as the development of the Saudi refractory plant, would cost between $800m and $900m. The company is planning to undertake a secondary listing over Nasdaq using a special-purpose acquisition company to expedite the process.
Conclusion
Saudi Arabia’s new investment in the second lithium processing plant is a clear indication of the country’s efforts to establish itself in the global battery supply chain. With the growing demand for electric cars worldwide, lithium is an essential component for which supply chains are expected to increase. The efforts of Saudi companies, for example, Obeikan Investment Group, and key partners such as BMW and Foxconn, to diversify beyond oil is part of an ambitious initiative known as “Vision 2030.” Lofty goals aim to expand into new industries while securing stable revenue streams that aren’t as reliant on oil production. These older efforts will undoubtedly be critical for the Saudi Arabian Economic Future.
Summary: Saudi Arabia is building its second lithium-hydroxide plant, with raw materials mined in Austria. The plant will produce the refined lithium hydroxide required by BMW, with the electric vehicle automaker set to acquire 9,000 tonnes of it per year. The majority of global lithium processing takes place within China, and the move shows how the supply chains for metalworking are gradually developing outside China. The lithium hydroxide plant is a JV between Australian-listed start-up European Lithium and Saudi conglomerate Obiekan Investment Group, with each taking a 50% stake in the facility. Saudi Arabia’s broader plan is to diversify beyond oil revenues and establish a more prominent role in EV battery manufacturing. The country has also signed an agreement with EV Metals to establish a second lithium hydroxide plant that will be operational in 2026.
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Saudi Arabia is planning a second lithium processing plant as it ramps up efforts to work with Western partners to develop its battery supply chain.
The plant, which will use raw materials mined in Austria to produce refined lithium hydroxide for BMW, is a sign of how supply chains for metalworking are slowly developing outside China.
China accounts for nearly 60% of global processing of lithium, a key ingredient in electric car batteries, and the EU and US are enhancement of incentives to create more capacity.
Australian-listed lithium start-up European Lithium and Saudi industrial conglomerate Obeikan Investment Group will each acquire a 50% stake in the plant. The plant will cost between $350 million and $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 its mine in southern Austria.
“Much of the world is afraid of what would happen if China shut down its [lithium] exports,” said Tony Sage, executive chairman of European Lithium. “That would be a disaster for the energy transition.”
For Saudi Arabia, the project is the latest in a series of agreements aimed at strengthening its role in electric vehicle battery manufacturing and supply chain – part of broader efforts to diversify beyond oil revenues.
Earlier this year Saudi Arabia signed an agreement with EV Metals, an Australian drums manufacturer, to develop a lithium hydroxide plant that will be in production in 2026.
Processing lithium is energy-intensive, and Sage said Saudi Arabia is an attractive location for a processing plant because of its cheap energy.
Saudi Arabia aims to produce 500,000 vehicles annually by 2030, including those produced in the country by US-based Lucid Motors, in which its sovereign wealth fund, the Public Investment Fund, has acquired a majority stake.
Lucid, which has struggled in recent years, said Wednesday it would raise $3 billion in an equity offering, with 60% of the funds coming from the PIF.
The asset fund, chaired by Crown Prince Mohammed bin Salman, has also started its own electric vehicle maker, Ceer, which it 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 tonnes of lithium hydroxide per year to the automaker starting in 2027.
Even as the West has scrambled to secure lithium resources, prices for the metal have fallen nearly 50% since the beginning of this year, although they are still above the average for the past three years.
European Lithium said its total capex requirement for the construction of its Austrian mine and nearby ore concentrator, as well as the development of the Saudi plant, would be between $800 million and $900 million. It is planning a secondary listing on the Nasdaq through a special purpose acquisition firm, or merger of blank checksin the next months.
https://www.ft.com/content/89b26197-87e9-4aa6-adde-797131af3d8a
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