Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Is the ‘perfect storm’ coming for Pilbara Minerals?

Pilbara Minerals shares have sunk with the lithium price, but CEO Dale Henderson is pressing on with expansion plans. Where next?

lithium Source: Bloomberg

Pilbara Minerals (ASX: PLS) is perhaps the poster child for the Australian lithium industry. The share price appreciation during the pandemic era, followed by the fall in line with the plunging spodumene concentrate price to $3.62, arguably makes the stock a bellwether for the wider industry.

In its recent Q4 activities report, the company saw sales increase by 9% to 159,900 tonnes of spodumene — though prices fell by 50% in the quarter-on-quarter to just $1,113 per tonne on a 5.2% basis — compared to $2,240 per tonne in the quarter prior.

But mining is cyclical — and CEO Dale Henderson remains resolutely positive.

Pilbara Minerals shares: the long game?

ASX lithium producers are struggling — the world’s largest mine, Greenbushes — is cutting back on production on falling demand. Core Lithium is now only processing stockpiles at Finniss. Liontown Resources is reducing expansionary plans by a third at Kathleen Valley. Piedmont has cut 27% of its workforce.

Wherever investors look, the story appears similar, and both national and state government are investigating royalty reliefs and production tax credits to keep the industry afloat.

But not at Pilbara, where CEO Dale Henderson is pressing on with its ‘P1000’ $560 million expansion to 1 million tonnes of production per annum at Pilgangoora, which is expected to be completed by the end of 2025.

Of course, Pilbara has the benefit of the $2.1 billion in cash it now holds in reserve, generated during the pandemic-era lithium price boom. But Henderson plans to defer its dividend rather than significantly cut capex, arguing that there may soon be a ‘perfect storm where pricing improves in combination with the new capacity that we’ve built out.’

The CEO further argues that Chinese customers remain ‘cautious in terms of the current outlook and the softer pricing… but they’re all very strongly convicted on the long term outlook, and all of them in one way, shape or form are continuing to build and continuing to ask Pilbara for more supply.’

For context, offtake partner Ganfeng has recently increased its contract from 160,000tpa of spodumene to up to 310,000tpa through to 2026. Meanwhile, Chengxin has upped its offtake to 85,000t in 2024, and then to 150,000t in both 2025 and 2026.

Where next for Pilbara Minerals?

Pilbara was recently hit with downgrades from both UBS and Citi based on reduced lithium pricing expectations over the next three years. It’s interesting to compare this perspective with the newly increased offtake agreements — it was the original lithium winter of 2019, when prices fell to half that of today — that saw new projects stall, causing the lithium price explosion and subsequent PLS share price rise.

History often rhymes, and minerals are often cyclical. ASX superannuation titan AustralianSuper has increased its position in the miner to over 153.36 million shares representing 5.1% of shares in issue. And while long-term demand for lithium may continue to increase with rising EV demand, it’s also worth noting the recent Chris Ellison and Gina Rinehart machinations over Liontown and Azure Minerals.

Pilbara’s acquisition of bankrupt neighbour Altura Mining and its attached plant helped propel the company forward after the 2019 lithium winter evaporated. While future mergers are not being actively planned, the company is highly capitalised, and many quality operations are not currently able to function profitably — which is an interesting position to be in.

Longer-term, Pilbara is at the whim of the lithium price. Goldman Sachs expects Spodumene Concentrate 6 (SC6) to average $1,250 per tonne in 2024 — slightly above current pricing. But longer-term, S&P Global estimates show lithium is expected to stabilise in 2025 as surpluses narrow, and then steadily rise.

Of course, few called the pandemic era boom — and a similar production gap may be starting to emerge sooner.

Past performance is not an indicator of future returns.

Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.*

Learn more about share CFDs or share trading with us, or open an account to get started today. *

Winner of ‘Best Multi-Platform Provider’ at ADVFN International Finance Awards 2022

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.