Saudi Arabia’s Lithium Ambitions: Trade,Policy,and Economic Implications

Abstract

This study evaluates the economic, trade, and environmental implications of Saudi lithium production using quantitative models, including Partial Equilibrium Modeling, Trade Network Analysis, Price Elasticity Modeling, and ARIMA/VAR forecasting. Findings indicate that Saudi lithium production could contribute to the stabilization of global prices, potentially reducing them by 1.4% to 2.9%, but it will not significantly disrupt major suppliers unless production exceeds projected capacities. Foreign direct investment barriers, the absence of domestic refining infrastructure, and water-intensive extraction methods are particularly challenging in Saudi Arabia’s arid climate and pose critical risks to industry growth and sustainability. Policy recommendations include establishing a structured lithium governance framework, incentivizing battery-grade refining investments, forging strategic trade agreements with EV manufacturers, and prioritizing sustainability-driven extraction strategies like Direct Lithium Extraction. Addressing there industrial, regulatory, and environmental constraints can position Saudi Arabia as a key lithium supplier, bolstering its energy security under Vision 2030 and enhancing global market stability.