What is the outlook for Pilbara Minerals shares in April?

Can this stock recharge returns from here?

| More on:
A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Pilbara Minerals Ltd (ASX: PLS) share price went down by around 9% in March 2024. Is the outlook more optimistic for the ASX lithium share?

There are two key parts of the story for Pilbara Minerals in the shorter term – how much lithium (spodumene concentrate) it produces and what price it gets for that production.

Production is growing

In the first half of FY24, the business delivered a 4% increase in its production to 320.2kt.

The company is aiming for a 70% increase in production as it constructs two projects.

The first project is the P680 expansion, the primary rejection facility is operational while the crushing and ore-sorting facility is under construction.

Pilbara Minerals' second project is the P1000 expansion which aims to take the production to 1mt per annum. Earthworks and foundations have commenced.

Growth of production will hopefully be supportive of the Pilbara Minerals share price.

The company recently announced two expanded offtake agreements, growing its supply relationship with leading battery chemical companies Ganfeng Lithium and Chengxin Lithium. Between those two companies, they have customers that include Volkswagen, Hyundai, Tesla, BYD, CATL, Umicore, LG Chem and BMW.

In the calendar years 2025 and 2026, those two companies could take between 410k to 460k of spodumene concentrate.

Lithium price

The FY24 first-half's financial performance was impacted by lower lithium prices – the realised price (CIF China) was down 67% to US$1,645 per tonne.

Is there going to be a recovery of the lithium price? It's difficult to say – a key part of the situation will be supply and demand.

Pilbara Minerals revealed numbers from Benchmark Mineral Intelligence which showed there were 13.8 million global electric vehicle sales in 2023 and this is predicted to grow to an estimated 36.1 million in 2028 and 59.1 million in 2033.

The annual lithium demand is projected to grow at a compound annual growth rate (CAGR) of 24% between 2023 and 2028. Of course, supply is also growing, with Pilbara Minerals adding to that.

Pilbara Minerals recently accepted a pre-auction offer for a 5,000 dry metric tonne (dmt) lithium spodumene concentrate cargo ahead of a scheduled digital auction of the Battery Material Exchange (BMX). The offer equated to an approximate price of US$1,200 per dmt on a SC6.0 China equivalent basis.

The company is going to review a variety of sales avenues including offtake contracts, closed tenders, auctions and other commercial opportunities.

UBS, a broker, recently suggested the average realised for the 2024 calendar year could be US$600 per tonne. It still sees the market in a surplus, though shrinking. Due to that, UBS has a sell rating on Pilbara Minerals shares.

But, of course, it's possible that the lithium price could positively surprise if demand is stronger than the pessimist expectations. In the longer term, Pilbara Minerals may be able to get exposure to more of the lithium supply chain.

Motley Fool contributor Tristan Harrison 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.

More on Materials Shares

A man rests his chin in his hands, pondering what is the answer?
Materials Shares

Are Liontown shares dirt cheap and a screaming buy in April?

One leading broker believes investors could generate big returns from this lithium stock.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Why are Rio Tinto shares outperforming the market on Wednesday?

Why are investors buying this mining giant's shares today?

Read more »

two men shake hands on a deal.
Materials Shares

Novonix shares fall despite Lithium Energy merger and IPO plans

These two companies are planning to merge their graphite operations.

Read more »

A miner in a hardhat makes a sale on his tablet in the field.
Materials Shares

Why has the lithium price quietly risen 20% in 2024?

After an 80% plummet in the lithium carbonate price last year, is there hope on the horizon?

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Materials Shares

Novonix share price booming 5% on cracking tax credit

The battery technology business won't be worrying about a big tax bill after securing this government handout.

Read more »

Woman in yellow hard hat and gloves puts both thumbs down
Materials Shares

Why is this ASX mining stock sinking 47% to a record low?

This mining stock is hitting new lows on Tuesday. But at least it is trading again.

Read more »

A man checks his phone next to an electric vehicle charging station with his electric vehicle parked in the charging bay.
Materials Shares

Buy Pilbara Minerals and these ASX lithium shares for big returns

Analysts believe these lithium stocks could rise strongly from current levels.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Materials Shares

ASX mining in April 2024: The best stock to buy right now

Analysts at Bell Potter think this mining stock could offer big returns.

Read more »