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Tesla Eyes Texas for New Lithium Refinery

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The potential plant would process and refine lithium hydroxide for use in Tesla's battery manufacturing facilities. | Image by Shack News

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The Gulf Coast of Texas could be the next location for a new lithium hydroxide refining facility.

Telsa CEO Elon Musk has been evaluating the feasibility of a lithium hydroxide refining facility near Texas’ Gulf Coast shipping channel that concentrates on the development of “battery-grade lithium hydroxide.”

The facility would be the first of its kind in North America, according to an application received by the Texas Comptroller’s Office.

With the price of lithium up 120% this year, Musk believes building a new refining facility would be a necessary first step in solving the growing lithium shortage, adding that lithium prices have “gone to insane levels.”

Lithium-ion batteries are used in most electric vehicles for their high energy output relative to other electrical energy storage systems, according to the U.S. Department of Energy. The supply chain of lithium-ion batteries used in EVs is tracked by Benchmark Mineral Intelligence, a price reporting agency and specialist information provider.

A new refining facility would allow Tesla to process “raw ore material into a usable state for battery production” and then ship the end product to its battery manufacturing factories across the country, the recent application said.

The application states that Tesla is considering alternative-battery materials processing, refining, manufacturing, and ancillary manufacturing operations to support Tesla’s sustainable product line to help the company stay competitive globally.

With China’s grip over the lithium market, Musk argues that finding alternative battery sources will help alleviate future lithium supply chain hurdles. China controls more than half the global supply of lithium and battery production. For comparison, the United States controls roughly 1% of lithium supply and production.

If the application is approved, Tesla could begin construction later this year, with commercial operations targeted for the end of 2024, according to the company. Musk is also considering building the refinery at a competing site in Louisiana.

While Tesla’s CEO is hopeful about the undertaking, Musk said he is still “evaluating the feasibility of this project” and “only very preliminary development activities have begun.”

No construction or procurement contracts have been negotiated or signed, and no regulatory permits have been obtained, according to Tesla. Musk said the project would only be viable through tax breaks under Texas law.

“In the case of the investment on this proposed project in Texas, the decision will be based on a number of commercial and financial considerations, including the ability to obtain relief regarding local property taxes,” according to the application.

The U.S. is ramping up domestic lithium production to stay competitive against China’s mining dominance, which Washington worries could lead to supply cutoffs if tensions with the country remain high.    

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