Saudi Arabia, the world’s largest energy exporter, is pursuing investments in lithium production in Latin America as the kingdom seeks to position itself as a key player in the manufacture of electric vehicles.
Bandar Alkhorayef, Saudi Minister of Industry and Mineral Resources, is expected to travel to Chile, which has the world’s largest lithium reserves, in July to meet his counterpart in the capital, Santiago, Reuters reported.
Mr Alkhorayef told Reuters earlier this year that the kingdom was interested in sourcing lithium from abroad as it aims to enter the EV sector.
The kingdom’s push into lithium comes at a time when China is dominating the processing of lithium, cobalt and rare earth elements, with other nations trying to reduce their dependency on a single source for critical minerals
However, they said that several steps were required before the kingdom could use it to manufacture EV batteries.
“There are a number of stages before you can take the raw ore in the ground and then turn and convert that into a product that is then capable of being used in an EV,” said Mehdi Ali, co-founder of Woodcross Capital, a Dubai-based private investment firm.
Mr Ali told The National that he would not be “surprised” if Saudi Arabia decided to not only secure raw materials such as lithium but also establish an entire EV battery production chain within the kingdom, from raw materials to finished products.
Riyadh is investing billions of dollars to transform itself into an EV centre as it seeks to catch up with the world’s top electric car makers, the US and China, while weaning itself away from oil exports.
The kingdom invested about $10 billion in California-based Lucid Motors, in addition to launching its own electric car brand Ceer in 2022 and constructing an EV metals plant.
Electric car sales were close to 14 million in 2023, 95 per cent of which were in China, Europe and the US, according to the IEA. Last year, the number of new electric car registrations hit 8.1 million in China, 1.4 million in the US and about 3.2 million in Europe, the agency said in a report earlier this year.
Hedging for the future
Robin Mills, chief executive of Qamar Energy told The National that it was “not necessary” for the lithium from a potential deal to be shipped to Saudi Arabia for use in its domestic EV industry.
“The more important thing is to have that vertical integration supply chain to give them an economic hedge because the pricing is not necessarily transparent,” Mr Mills said.
After two years of dramatic increases, the prices of critical minerals fell sharply in 2023, returning to levels last recorded before the pandemic.
Materials used to make batteries registered particularly significant decreases, with the price of lithium dropping by 75 per cent last year, the International Energy Agency said in a May report.
The prices of cobalt, nickel and graphite fell by between 30 per cent and 45 per cent.
“Having a position in the chain is helpful for the margins and the predictability of the supply chain for anything that they’re trying to do in the battery space,” Mr Mills said.
The second UAE Electric Vehicle Grand Prix for high school teams is being held in Abu Dhabi, on March 2. All photos: Vidhyaa Chandramohan for The National
Saudi Arabia has been actively seeking mining and mineral assets in Latin America.
Last year, a joint venture company between Saudi Arabian Mining Company and the Public Investment Fund announced the acquisition of a 10 per cent stake in Brazilian mining major Vale for an enterprise value of $2.6 billion.
“We are hearing rumours of other interests in some of the other majors, whether that happens or not,” Mr Ali said.
The kingdom’s neighbour, the UAE, is also taking steps to invest in critical metals.
Last year, Abu Dhabi’s International Resources Holdings bought a 51 per cent stake in Zambia’s Mopani Copper Mines for $1.1 billion.
Through these acquisitions, Saudi Arabia and the UAE are also hoping to build the expertise and human resources necessary to develop their own mineral sectors, Mr Ali said.
The kingdom, which aims to more than triple the mining sector’s contribution to the nation’s economic output by 2030, has discovered significant deposits of gold and silver, as well as copper, tin, tungsten, nickel, chrome and zinc through exploration projects.
“Maybe lithium is one gap that they just don’t have domestically. The Saudi resources are at an early stage of development [and it] takes a long time to explore and then develop a major mine,” Mr Mills said.
“It makes sense for them to have a position in international supply chains as well.”
Chile’s lithium reserves are in more than 60 salt flats scattered across the mountains of the northern Atacama Desert.
Currently, only two companies produce lithium in the country – Chilean company Sociedad Quimica y Minera (SQM), with China’s Tianqi as its second-largest shareholder, and US-based Albemarle.
Despite having the largest reserves, Chile trails Australia in lithium production.
In a surprise move last year, Chilean President Gabriel Boric announced plans to partially nationalise the country’s lithium industry to bolster the economy and protect the environment.
“If you look at the South American countries, they want to do processing themselves. They want to have more domestic processing and add value at home, rather than exporting raw materials,” Mr Mills said.
“If the Saudis are not going to get raw lithium to refine at home, they might get processed lithium eventually for their own uses.”
Saudi Arabia is reaching out to countries with mineral and energy sources it could domestically produce, but only at a high cost and with several years of investments, said Francesco Sassi, research fellow at Ricerche Industriali Energetiche in Bologna.
“The acquisition of foreign know-how, multilateral diplomacy and market diversification appear the pillars of this new phase of Saudi [Arabia]’s energy strategy,” he said.
US-China tensions
Saudi Arabia’s entry into the critical minerals space comes amid growing geopolitical tension between the US and China – the world’s two largest economies.
China currently dominates the global market for critical minerals. It is the world’s leading producer of 29 different commodities, including 22 metals and seven industrial minerals.
The US and the EU are desperately trying to close the gap with Beijing by building relationships with resource-rich countries in Africa and South America.
The EU recently announced tariffs of up to 38 per cent on Chinese EVs to curb the flood of much cheaper Chinese electric vehicles being imported into the bloc.
“Saudi Arabia and the UAE sit at the middle road between China and the West, and are playing kind of a balancing act,” Mr Ali said.
“Saudi Arabia’s ambitions are driven by their own interests as a nation … and, ultimately, they will probably collaborate both with the Chinese and with the Americans, where necessary, for the technology they need to for further beneficiation and processing.”
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