Pilbara Minerals shares: untangling the contradictions
Pilbara Minerals shares have been falling since August as the lithium price sinks below CNY100,000 per ton. Where next?
![lithium mining](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/news-article-image-folder/BG_mining_iron_23-4923948.png/jcr:content/renditions/original-size.webp)
Pilbara Minerals (ASX: PLS) shares may have risen by over 400% over the past few years, but the ASX 200 lithium producer has seen its shares fall from AU$5.31 in August to just $3.60 today. Unsurprisingly, the question for would-be investors is whether this fall represents an opportunity — or whether the knife is still falling.
Past performance is not an indicator of future returns; but few predicted the lithium price boom a few years ago. And there are some clues to be garnered from major players in the lithium space.
Pilbara Minerals shares: lithium price
It can be difficult to know where lithium mining stocks will go — to start with, unlike other hard commodities like iron, gold or oil, lithium is widely regarded as a non-fungible speciality chemical and therefore it’s much harder to track price movements.
Chinese pricing shows that lithium carbonate prices have fallen from their peak of just below CNY600,000/tonne in November 2022 to below CNY100,000/tonne today. Investors have blamed a supply glut due to Chinese firms taking advantage of now ceased subsidies in 2021 and 2022 — alongside soaring deliveries to the country from Chile.
Indeed, stockpiling is ongoing at Greenbushes — widely regarded as Australia’s highest quality lithium mine — and its operator is considering both production cuts and lower sales.
For Pilbara, the question is one of whether current pricing improves. The company has significant expansion plans, but these only make economic sense at a certain pricing level; and the floor is yet to be found. For context, Morgan Stanley analysts thought that lithium markets were at a ‘turning point’ as far back as May 2023.
Pilbara Minerals share price: where next?
Pilbara has been hit with two downgrades recently. First, UBS cut its price target from AU$3.75 to AU$3.05 and put a ‘sell’ rating on the stock. The bank has downgraded its forecast lithium price expectations for the next three years significantly, and consequently reduced expectations for Pilbara’s earnings by 38% in F24, 69% IN FY25 and 51% in FY26.
It notes there is ‘no risk to production growth plans’ but also argues there will be ‘reduced cash flow in this heavy investment cycle.’
This week, Citi piled on the pressure — downgrading its rating to ‘neutral’ with an AU$3.90 price target on the stock, also citing downgraded lithium pricing expectations. And then, more bad news. Long-time Chairman Anthony Kiernan AM is retiring at the end of January 2024, weakening the board.
But investment banks work on 12-month timeframes, and while their lithium price expectations are longer-term, multi-year commodity pricing predictions are notoriously uncertain. And longer-term, Pilbara Minerals is clearly attractive to at least one institutional investor.
Over 2023, ASX superannuation titan AustralianSuper has increased its position in the miner to over 153.36 million shares representing 5.1% of shares in issue — a threshold that merited an ASX announcement.
These types of funds are preparing for the very long term. And it’s worth noting that Rio Tinto has just forecast a 945% increase in lithium demand over the next 10 years. Then there’s the Chris Ellison and Gina Rinehart machinations to consider — significant effort is going into securing the best lithium supplies for the future.
To ride out the storm, CEO Dale Henderson recently argued that ‘what gives us comfort is being a low-cost producer and being at the low-end of the cost curve, so we make sure that's front of mind for us and such that we can weather any ups and downs.’
For context, PLS delivered 144.2 kilotons of spodumene in Q1 FY24, and is working hard to gain more exposure to the lithium supply chain. This includes working with Calix on a mid-stream demonstration plant using the partner’s patented electric kiln tech — reducing carbon emissions through renewable energy.
And then there’s also the much-vaunted project with POSCO to build a lithium hydroxide chemical facility in South Korea — with the first train on schedule to start commissioning in this quarter.
While analysts seem pessimistic about the short to midterm lithium pricing dynamics, Rystad Energy Vice President Susan Zou recently argued that ‘the global battery supply chain may find lithium in shortfall again approaching the end of this decade when the supply growth might not keep pace with that of the demand.’
ASX 200 lithium stock investors may struggle with these conflicting points of view.
Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.*
Learn more about share CFDs or share trading with us, or open an account to get started today. *
Winner of ‘Best Multi-Platform Provider’ at ADVFN International Finance Awards 2022
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/Rebrand/Article_banners/Shares-global-component-banner.jpg/jcr:content/renditions/original-size.webp)
Act on stock opportunities today
Go long or short on thousands of international stocks with CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Try a risk-free trade
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.