The Pilbara Minerals Ltd (ASX: PLS) share price has fallen 30% over the past year. After such a rough 12 months, it's worth asking whether the ASX lithium share can rebound.
But, it's also possible the business could drop even further.
It has been a difficult period for lithium miners, with the lithium price dropping substantially over the past two years amid weaker demand and rising production from lithium miners like Pilbara Minerals.
Lithium is just as vulnerable to supply and demand factors as any other commodity.
If we were to invest $10,000 into Pilbara Minerals shares today, let's consider how much that investment could change in value in the coming 12 months.
Price target on Pilbara Minerals shares
A price target is where analysts think the share price will be in 12 months from the time of the investment call.
The experts don't have a crystal ball, but it's their best guess on how the share price will perform based on market conditions and projections.
Broker UBS recently decreased its price target on Pilbara Minerals shares from $2.20 to $2.00.
That means the ASX lithium share is predicted to decline another 30% from where it is today.
If we made a $10,000 investment today, the UBS price target implies the investment could drop to $7,000 over the next 12 months.
Why is UBS so pessimistic about the ASX lithium share?
The broker's global materials team recently analysed the impacts of the emergence of African and Chinese lithium supply.
Latin American brine and Western Australian spodumene were responsible for the initial supply increase (according to UBS), the new African and Chinese sources of supply "are real" and are benefiting from Chinese efficiencies, quicker approvals and lower investment hurdles and better economics, especially for integrated mining projects.
UBS has downgraded its lithium price expectations after reducing its forecast for demand from 2025 to 2028.
The broker said that while the African region remained a "challenge" from a logistical perspective, a UBS analyst visit to Africa led to a greater understanding and conviction of further supply growth.
It thinks Africa's lithium supply will grow from zero in 2022 to around 290kt of lithium carbonate equivalent (LCE) in 2028, before reaching around 10% of global supply. UBS said:
In our view, supply growth from this region is real and is not going anywhere. This contrasts with lithium bulls in the market still dismissive over the quantum and cost competitiveness of this supply.
UBS noted that Chinese producers were generally seen by the market as the "marginal cost players", but the broker's analysis finds "it's at a much lower level than the market previously thought".
Due to these dynamics, the lithium price is negative again, with forecast spodumene prices of US$750 per tonne and US$725 per tonne over 2025 and 2026. This is at least 31% lower than the market (consensus) estimates.
The Pilbara Minerals share price could be impacted significantly if this pessimistic prediction comes true. The outlook doesn't look positive.
