Why are ASX lithium shares like Pilbara Minerals crashing on Tuesday?

Lithium stocks are getting another whack today.

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Tuesday's trading thus far has been bumpy. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is essentially flat after spending time in both positive and negative territory today. But let's talk about what's going on with ASX lithium shares like Pilbara Minerals Ltd (ASX: PLS).

Put simply, it's been a horror day for lithium stocks. Take the Pilbara share price. It's currently nursing a loss of 4.2% down at $4.22 a share.

Sayona Mining Ltd (ASX: SYA) is down 4.44% to 4.3 cents, while Liontown Resources Ltd (ASX: LTR) shares have sunk 4.51% to $1.27.

Core Lithium Ltd (ASX: CXO) and Arcadium Lithium plc (ASX: LTM) are faring a little better, but are still down 2.04% and 2.42% respectively.

So why is this corner of the market seemingly getting singled out for punishment today?

Why are ASX lithium stocks getting a Tuesday whack?

Well, it's not entirely clear. There hasn't been any major news or announcements out of any ASX lithium stocks today that might explain this pessimism.

Saying that, what happened in the US markets last night might give us the clue we need to decipher what's going on in this space.

Last night (out time) saw the share price of Albemarle Corporation (NYSE: ALB) tank by a nasty 6.75% down to US$133.20 a share. The company fell another 7.44% during after-hours trading down to US$123.15.

Albemarle is one of the largest lithium companies in the world and often sets the tone for what happens on the ASX with our own lithium stocks. So this fall was never going to bode well for ASX lithium shares like Pilbara.

It seems the reason behind Albemarle's share price plunge was the news that the company is about to conduct a capital raise. According to an SEC filing, Albemarle plans on issuing 35 million new depository shares in order to raise US$1.9 billion.

Albemarle stated the following regarding how it intends to use this US$1.9 billion:

We intend to use the net proceeds of this offering for general corporate purposes, which may include, among other uses, funding growth capital expenditures, such as the construction and expansion of lithium operations in Australia and China that are significantly progressed or near completion, and repaying our outstanding commercial paper.

Given the nature of this capital raise, it's likely that the plummeting lithium prices we've seen in recent months are to blame for Albemarle's evident lack of capital right now.

ASX investors are probably sending our own lithium shares down so severely because if Albemarle, one of the world's largest lithium stocks, needs to raise capital, then it is easy to assume the likes of Pilbara, Aradium, Liontown and Sayona are feeling the squeeze even more acutely.

ASX investors may even be worried that any one of these ASX lithium shares could be next to come cap-in-hand to shareholders.

Let's see if this eventuates.

Motley Fool contributor Sebastian Bowen 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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