Pilbara Minerals the most shorted ASX stock as lithium demand sours over electric vehicles

Pilbara Minerals is being shorted more than any other company on the ASX as a group of investors seeks to exploit its exposure to tumbling lithium prices.

A fifth of all shares in Pilbara Minerals are now held by short sellers seeking to exploit the company’s exposure to lithium markets as prices for the material essential to electric vehicle batteries dives on softer than expected demand prospects.

Data from the Australian Securities and Investments Commission shows that 20.4 per cent of Pilbara Minerals is now reported as a shorted position as of November 22, compared to 1.8 per cent a year ago. Half of the 10 most shorted stocks on the ASX are now mining companies with exposure to electric vehicles in contrast to 2022 when it was populated by tech and buy now, pay later firms.

ASIC’s aggregated short position reports are reliant on the accuracy of reports it receives from individual short sellers. Investors who short sell bet on a fall in the share price of a particular stock in order to make a profit.

E&P Financial resources analyst Adam Martin told The Australian hedge funds are shorting lithium stocks such as Pilbara Mineral on expectations prices will keep falling in the short term.

“Pilbara is a large liquid pure play in the sector, so in a single asset company, so there is lot of leverage to lift your price going up or down,” he said.

Pilbara Minerals is the most shorted stock on the ASX. Pictured is chief executive Dale Henderson at its Pilgangoora project. Picture: Carla Gottgens/Bloomberg

“People are shorting (Pilbara) even though the balance sheet’s really strong. The hedge funds aren’t shorting it because they’re worried about the balance sheet, they’re shorting it saying this is a stock that did very well on the way up and it’ll give up some ground on the way down.”

While Pilbara Minerals rallied 2.3 per cent on Thursday to a one-week high of $3.64, losses in the past month were past 6 per cent compared to a 4 per cent gain for the ASX 200. Shares have also lost 22 per cent in the past six months at which time the company’s exposure to shorts increased from about 7 per cent.

Pilbara managing director Dale Henderson said that investors are betting on further price declines and have shorted Pilbara Minerals stock its exposure to lithium market pricing which has been volatile of late.

“Pilbara Minerals stock presents as one of few financial options to do this given its; scale, liquidity and pure play nature. The lithium market has historically turned very quickly and may do this again given the strong long term demand drivers,” he said.

AustralianSuper is among the investment houses that have looked to buy the dip in Pilbara Minerals with it now a holder of 5.1 per cent of the company after a recent buying spree in the past week, a form lodged on Thursday with ASX shows.

Flight Centre has a smaller pool of shorters than a year ago. Picture: Tertius Pickard

Lithium carbonate prices in China are at the lowest level since August 2021 of 126,500 yuan ($26,845) and down by 80 per cent from a record high of 598,000 yuan achieved in late 2022. UBS recently downgraded EV demand through to 2030 by as much as 15 per cent in key European and US markets and lowered its lithium price outlook by up to 50 per cent in the coming years. It also downgraded Pilbara Minerals to sell and with a price target of $3.45.

““There is also concern about how demand growth may reduce into 2024 and therefore the battery supply chain is effectively preparing for that, Mr Martin said.

“A positive medium term certainly could see further short-term pressure given lithium prices haven’t reached sort of levels that are below operating costs for mines.”

Battery materials miner, Syrah Resources, was the second most shorted stock on the ASX with 18.8 per cent of all shares reported as short. Core Lithium was in third at 11.8 per cent, followed by artificial intelligence player Appen.

Flight Centre was in fourth with 10.5 per cent of all shares shorted compared to 14.7 per cent on the same day last year. Other stocks in the top 10 were Sayona Mining, Genesis Minerals, IDP Education, Bank of Queensland and Weebit Nano.

The most shorted stocks list this time the year prior had Betmakers, Flight Centre, Block, Domino’s Pizza and Megaport in the top five.

Top 10 ASX with the highest reported short positions

1. Pilbara Minerals – 20.36 per cent

2. Syrah Resources – 18.75 per cent

3. Core Lithium – 11.76 per cent

4. Appen – 10.68 per cent

5. Flight Centre – 10.54 per cent

6. Sayona Mining – 10.53 per cent

7. Genesis Mineral – 10.43 per cent

8. IDP Education – 9.86 per cent

9. Bank of Queensland – 8.75 per cent

10. Weebit Nano – 8.12 per cent.

Source: ASIC (November 22, 2023)