The ASX lithium share Pilbara Minerals Ltd (ASX: PLS) is under the spotlight after its latest auction showed a reduction of the lithium price.
Pilbara Minerals is one of the largest lithium mining companies in Australia. How much it sells its production for is something market watches closely.
Latest lithium auction
The lithium business uses the digital auction platform called Battery Material Exchange to sell small parcels of its production for a very high price.
This morning, the company announced that it sold two cargoes totalling 10,000 dry metric tonnes (dmt). The average price for the sale was US$7,552 per dmt.
This is equivalent to a price of US$8,299 per dmt when equating it to a different benchmark, and including freight. The deliveries are expected from late January 2023.
I think this is interesting because it represents a decline in the lithium priced achieved, after a year of higher prices at the BMX auctions.
The last auction in mid-November resulted in a bid of US$7,805 per dmt for 5,000 dmt, equivalent to a bid of US$8,575 per dmt.
What to make of this for Pilbara Minerals shares
It’ll be interesting to see the sustained reaction to this for the Pilbara Minerals share price.
The lithium price wasn’t going to keep climbing forever. There are many other lithium miners, more lithium supply is coming online and lithium users would probably slow down their demand if the price was too high.
Pilbara Minerals is benefiting from the strong lithium price, with strong profit generation. This is adding to its cash pile, funding its growth initiatives and enabling the business to start paying dividends in FY23.
I think the ASX lithium share has a very promising future – a lot of electric cars are going to be solid this decade. However, we may have seen the peak of the Pilbara Minerals share price for now, so I’d want to wait a little while to see if the share price will drift lower.
