POSCO and partner Samsung SDI had won a government tender last year to build the plant in Chile, in exchange for a 27-year supply of low-cost lithium from Albemarle, Reuters reported.
However POSCO told the wire service the project required lithium hydroxide, favoured by EV battery manufacturers, not lithium carbonate which was what Albemarle primarily produced in Chile.
Reuters said Samsung SDI was still reviewing the project after Posco's news.
Albemarle had reached agreement with Chile's development agency Corfo in January over the preferential pricing deal as it moves to expand lithium carbonate equivalent production in South America.
The US-based specialty chemicals manufacturer also broke ground at the start of this year on its own Kemerton lithium hydroxide conversion project in Western Australia.
Separately, WA lithium miner Pilbara Minerals exercised its option in March to continue progressing a downstream joint venture with POSCO, looking to build a dual-purpose lithium conversion plant in South Korea capable of producing lithium hydroxide or lithium carbonate products.