Why are ASX lithium shares being annihilated on Friday?

It's a bad day to own lithium stocks…

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To be fair, most ASX shares aren't having a very pleasant day this Friday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has slumped by a nasty 1.4%. But ASX lithium shares are really taking a hit during today's trading.

Take the Pilbara Minerals Ltd (ASX: PLS) share price. Pilbara shares are currently nursing a horrid loss of 5.64% down to $3.94 a share.

Liontown Resources Ltd (ASX: LTR) has been hit even harder, with its shares down 7.33% to $1.26 each. Core Lithium Ltd (ASX: CXO) hasn't been punished as much, but has still copped a 5.26% hit to 18 cents a share. But Arcadium Lithium plc (ASX: LTM) is enduring a 7.07% sell-off to $6.83.

So what on earth is scorching the ASX lithium share space so brutally this Friday?

Why are ASX lithium shares in a Friday freefall?

Well, it's hard to say. We did get some news out of Pilbara yesterday that could be having an impact on today's trading. Pilbara informed investors yesterday afternoon that it was able to secure a pre-action bid of US$1,106 per dry metric tonne for a 5,000-tonne shipment of lithium spodumene concentrate.

That's an improvement on what pricing the company has been able to secure in recent months amid the ongoing slump in global lithium markets. As such, this news is unlikely to be a major catalyst in today's ASX lithium share sell-off.

So we can probably point to a simple reluctance of ASX investors to hold lithium shares during a broad-market route to explain today's events in the lithium space.

Lithium shares tend to be amongst some of the most volatile shares on the ASX. Before the recent slump in lithium prices, these shares tended to rocket when the broader markets were rising, and crater when things went the other way.

Overnight on the US markets, we saw American lithium stock Albemarle Corporation (NYSE: ALB) shares shed a hefty 4.39% of their value down to US$119.89 a share. This probably helped set the mood for ASX lithium stocks this morning too.

Given concerns that interest rates might not be coming down as soon as investors hope today, it's no real surprise to see ASX lithium shares cop a beating.

No doubt investors will be hoping next week proves to be kinder to this corner of the share market.

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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