The Pilbara Minerals Ltd (ASX: PLS) stock price has seen a fair amount of pain over the past couple of years. Since August 2023, it has dropped more than 50%, as shown on the chart below.
The ASX lithium share has suffered from the pain of a lower commodity price. In the three months to September 2024, the realised sales price for its lithium (spodumene concentrate) was US$682 per tonne, 19% lower than the US$840 per tonne in the three months to June 2024.
To find out if the Pilbara Minerals stock price has already reached rock bottom, let's examine what one expert thinks of the current situation and outlook for lithium.
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Outlook for lithium
In the last couple of months, broker UBS has mentioned multiple times that lithium may have seen its low.
At the end of November 2024, UBS increased its estimates for the lithium spodumene price for 2025 and 2026 by 7% and 17% to US$800 per tonne and US$850 per tonne, respectively. This was after looking at the global supply and demand equation.
The broker thinks that the lower lithium price will delay some growth plans by different miners:
We expect to hear more from the companies themselves on this in the new year. On top of our near term China supply cuts, delaying these projects brings forward a market rebalance but the prospect of a short-term price spike remains unlikely while latent capacity like CATL is out there.
In early December, UBS said that lithium was "through the worst of it". This could have ramifications for Pilbara Minerals stock. In the note, UBS explained:
Lithium prices are down ~10-30% YTD, but more recently the supply response has accelerated, with curtailments and deferral/slowdown of projects.
Our recent update (What's in store for 2025?) saw us turn incrementally positive, with demand (+18% y/y) outpacing supply (15% y/y) and the surplus now drawing down by 2027-28 (prior 2030). While latent capacity (e.g. CATL) will limit potential for sustain price spikes, we believe the worst of the downcycle is over. We remain underweight the sector, remaining Sell rated PLS…
Forecasts for the FY25 second quarter
Just over a week ago, UBS analysts shared some thoughts about the miner's upcoming quarterly update for the three months to 31 December 2024, scheduled for release on 29 January 2025.
The broker estimates that Pilbara Minerals may have achieved a realised price of US$641 per tonne in the second quarter, and the production may have been 194kt.
Commenting on the lithium sector, UBS said:
Having been underweight the sector for >18 months, the equity trade may have largely played out with equity valuations no longer stretched, but we are not turning positive just yet.
We expect operational performance and scrutiny over medium- to long-term growth plans and the ability to fund them to take precedence in a range-bound pricing environment.
UBS currently has a price target of $2.40 on Pilbara Minerals stock and a sell rating. That implies little movement over the next 12 months. We may have seen the bottom, but it's not expected to get much better in the short term.
