Why did the Pilbara Minerals share price sink 9% in February?

Investors were selling down this mining share in February amid concerns over lithium prices…

The Pilbara Minerals Ltd (ASX: PLS) share price was out of form in February.

Over the course of the month, the lithium giant's shares dropped 9% to end the period at $4.17.

This is over three times greater than the 2.9% decline recorded by the ASX 200 index.

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.

Image source: Getty Images

Why did the Pilbara Minerals share price tumble?

Investors were selling down Pilbara Minerals shares last month after lithium prices continued to weaken.

Earlier this week Goldman Sachs spoke about recent lithium price weakness and its belief that this is the starter of greater declines. It said:

We note the lithium chemicals spot and forward pricing has continued to decline, with our commodities team reiterating their expectation for lithium prices to decline from 2H23, supported by recent China trip feedback suggesting risk of higher than expected lithium supply, and the larger operating Australian spodumene projects either recently outperforming production expectations (and increasing near term production guidance) or lifting medium term production growth targets.

Can it rebound in March?

Well, the good news is that the Pilbara Minerals share price has started the month very positively.

Despite the ASX 200 index continuing its slide, at the time of writing, the company's shares are up almost 5% to $4.37.

The even better news is that one broker believes its shares can keep rising. Yesterday, analysts at Morgans retained their add rating with a trimmed price target of $5.30. This implies potential upside of 21% for investors.

Its analysts disagree with Goldman Sachs and expect lithium prices to remain strong. They said:

Spot prices have softened but remain above contract prices. The Chinese EV market, still the world's largest, has slowed recently for the Spring Festival but we expect activity to increase in the near future. Meanwhile, lithium projects are taking longer to complete leaving the market tight. Decreasing lithium production but increasing demand reflected in analyst consensus of key Chinese companies points to tightness continuing.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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