Pilbara Minerals Limited: Lithium’s Bear Market Could Be An Opportunity (OTCMKTS:PILBF)

Lithium is a rare silvery-white chemical element with the symbol Li. It is an alkali metal with many industrial uses and is the least dense solid element. Lithium is a highly combustible solid that reacts violently with water. The metal, powder, or dust may also spontaneously ignite in the air.

Lithium is a naturally occurring element in rock ores or briny water, where extraction uses evaporation. Processors crush the ores into lithium, which is an essential ingredient in clean energy and other technologies. Lithium carbonate is an inorganic compound, the lithium salt of carbonic acid. The white salt is the ingredient in metal oxides.

Lithium prices peaked in November 2022 and plunged to lows in late 2023, where they remain as the price consolidates. Pilbara Minerals Limited (OTCPK:PILBF) is a lithium producer.

An ugly bear market in lithium may have reached its bottom

Lithium Carbonate prices reached a high in November 2022 before plunging.

The chart shows that the price of lithium has declined by over 80% price since late 2022. However, the price action since late 2023 illustrates the consolidation pattern near the low developed throughout 2024.

Lithium consumption is rising

Lithium is a critical ingredient in lithium-ion batteries that last longer than alkaline batteries. Toys, cameras, flashlights, wireless headphones, handheld power tools, large appliances, and remote controls tend to use lithium-based batteries. Moreover, lithium is crucial for electric vehicles and electrical storage systems.

As the chart illustrates, global lithium consumption has been rising, and projections indicate that the bullish demand trend will continue.

Meanwhile, production has increased as the demand has grown.

The chart highlights the increase in lithium mine output over the past years.

Australia leads the world in lithium output- Pilbara is an Australian producer

Australia is the world’s leading lithium-producing country.

Leading producer Australia released more than double the second-place Chile’s output in 2021.

Pilbara Minerals, an Australian company, is the world’s sixth-leading lithium producer. PILBF’s company profile states:

At $2.10 per share, PILBF had a $6.22 billion market cap. The stock trades an average of over 111,000 shares daily and pays no dividends.

Since 2016, PILBF shares have traded as low as 8-10 cents as the global pandemic gripped markets across all asset classes in March 2020 and as high as $3.71 per share in late 2022 when lithium prices peaked. At over $2 per share, the stock is in the middle of the price range as lithium prices consolidate near the lows.

PILBF and its peers

PILBF is the largest lithium company compared to its Seeking Alpha peers.

The chart shows that PILBF’s $6.22 market cap and enterprise value are just under double those of the second-leading lithium producer, Lynas Rare Earths Limited (OTCPK:LYSDY), also an Australian company.

A bullish trend since the 2020 low

PILBF has been in a bullish trend, making higher lows since the 2020 bottom.

The chart shows the significant recovery from under 10 cents per share and the consolidation pattern that has held above the $2 per share level since August 2022.

Pilbara Minerals Limited shares should reflect the price action in the global lithium market. Given the rising global demand, the longer lithium consolidates near the lows, the greater the chance of a price recovery. Since there is no direct route for a lithium investment, PILBF could be an adequate proxy for the commodity that is critical for green energy initiatives with many other technical applications. The end of the bear market for lithium could mean higher prices for Pilbara Minerals Limited shares.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.