Is it time to buy back into ASX lithium shares like Pilbara Minerals?

Owning ASX lithium shares — such as Pilbara Minerals Ltd (ASX: PLS) shares, for example — has been a terrible experience for investors over the past two or so years.

Since 11 November 2022, the Pilbara Minerals share price has declined 58%, and other lithium shares have fared even worse. The Sayona Mining Ltd (ASX: SYA) share price has dropped 89%, shares in Liontown Resources Ltd (ASX: LTR) and Mineral Resources Ltd (ASX: MIN) are down 72% and 57%, respectively, and the IGO Ltd (ASX: IGO) share price has plunged 70%.

ASX mining shares are known for their volatility. It's normal for them to go through booms and busts, depending on what's going on with global supply and demand for the commodity.

Over the past two years, the lithium price has fallen significantly as lithium supply climbed and demand slowed.

But, investors may see opportunities with bombed-out ASX lithium shares. If there's a good time to buy a commodity-based company, it's probably when that commodity has plunged.

The Australian Financial Review reported on comments by fund managers on the lithium sector. Experts included portfolio manager Casey McLean at Fidelity International and Andrew McAuley, chief of investments at UBS Global Wealth Management Australia.

Here's what they had to say.

Why investors should be cautious on ASX lithium shares

There are global trends that are increasing the demand for lithium, such as decarbonisation and electrification. McLean said these are strong themes that could drive lithium demand, but the battery commodity may not be the best way to play these themes in early 2025. The Fidelity portfolio manager said:

Although lithium prices are down around 80 per cent from the peak two years ago, it is still too early to buy. This is because supply additions are accelerating, the cost curve is flattening and there are some near-term risks around EV demand.

However, UBS' McAuley thinks we could be approaching the time to invest for the long-term. It was reported by the AFR that miners have underperformed recently because of concerns about China's economy.

McAuley said:

They are at or near the bottom of the cycle which is usually a good time to buy.

However, we would like to see more concrete signs of increase in global GDP, and definitive recovery in China before stepping up to the plate.

He also suggested that in the longer term, resource and utility companies look well-placed for growth.

These experts are not bullish on Pilbara Minerals shares or the wider ASX lithium share sector, but time will tell whether the lithium companies can excite investors again.

The post Is it time to buy back into ASX lithium shares like Pilbara Minerals? appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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