Unless a miracle happens before the market closes shortly after lunch today, the Pilbara Minerals Ltd (ASX: PLS) share price is going to record a significant decline in 2024.
As things stand, the lithium miner's shares are on course to record an annual decline of approximately 45%.
To put that into context, if you had invested $10,000 this time last year, your investment would now only be worth $5,500.
What went wrong for the Pilbara Minerals share price?
Investors were rushing to the exits in 2024 after lithium prices failed to recover and instead sank deeper into the red.
For example, according to Goldman Sachs, earlier this month the lithium spodumene 6% spot price was US$790 per tonne.
As a comparison, the lithium spodumene 6% price traded with an average of US$4,368 per tonne in 2022 and then US$3,712 per tonne in 2023.
And while Goldman expects improvements in the coming years, don't get your hopes up just yet. The broker is forecasting an average of:
- US$800 per tonne in 2025
- US$978 per tonne in 2026
- US$1,155 per tonne in 2027
Based on the above, the days of hugely profitable lithium mining operations appear to be over. And given how accurate Goldman has been on lithium in recent years, it seems the market is putting a lot of weight on these forecasts and have been selling down the Pilbara Minerals share price accordingly.
Could things be better in 2025?
It is worth noting that not everyone agrees with Goldman Sachs' bleak view on lithium.
For example, the team at Bell Potter believes that the lithium market is heading towards a supply deficit in 2026.
If this proves accurate, it could give lithium prices a major lift in 2025 as battery makers scramble to get hold of lithium before it runs out. This could give lithium miners and the Pilbara Minerals share price a major boost.
Commenting on the potential for a supply deficit, Bell Potter said:
We calculate that recent supply curtailments from Australian producers (including PLS) have removed around 50kt of Lithium Carbonate Equivalent from the market (around 4% of 2024 supply). On our supply-demand modelling, the cuts result in a smaller market surplus in 2025 and brings forward our estimate of a market deficit to 2026 (previously 2027).
In light of this, the broker recently upgraded Pilbara Minerals shares to a buy rating with a $2.95 price target. This implies potential upside of 33% for investors over the next 12 months.
Time will tell which broker makes the right call on lithium.
