Why has the Piedmont Lithium share price tumbled 30% in a month?

Piedmont extends losses today.

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Key points
  • Piedmont Lithium shares extend losses today and are now deep in the red for FY23 
  • The share has been punished alongside the wider mining sector as the commodity trade shows signs of exhaustion 
  • Piedmont is down 43% in the past 12 months on the chart 

The Piedmont Lithium Inc (ASX: PLL) share price is rangebound in afternoon trade on Monday.

At the time of writing, the share is flat at 50.5 cents apiece, a shade off its 52-week low of 48.5 cents.

Zooming out, Piedmont has lost more than 28% in the past month of trade and has fallen from a previous high of 93.5 cents on 31 May.

In broad market moves, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is flat on the day as well.

white arrow pointing down

Image source: Getty Images

What's up with the Piedmont Lithium share price?

Investors have punished the share in CY2022 as a good chunk of the global commodity trade begins to unwind.

Whilst lithium continues to remain buoyant, key price drivers such as Brent Crude oil have consolidated from a top in March.

Copper has followed suit and retraced heavily from its March highs. It now trades back in line with November 2020 levels.

The weakness in these key industrial metals has transposed over the wider metals & mining sector. As a basket, it too has been clamped down recently, shown below in deep blue.

TradingView Chart

In fact, as the chart shows, each of these instruments traded with a tight fit over the past 3 months, with each realising losses at the same pace.

This is not unreasonable to see, seeing the high correlation of various shares within the sector.

For the Piedmont share price (shown in red), it has traced this basket with striking similarity as investors unload shares, along with the bulk of its peers in the ASX mining index (deep blue).

Whilst correlation doesn't mean causation, the trend does suggest there is weakness in the wider mining sector, as represented by each of these instruments.

Meanwhile, earlier this month, the company also announced that its 25%-owned North American Lithium (NAL) program in Canada aims to start producing lithium spodumene next year.

This will require a large capital expenditure bill to bring infrastructure up to speed.

With the battery metal still commanding a premium, this could inflect positively for Piedmont if investors reward the share price.

With that in mind, time will tell what's in store for the Piedmont share price next. It is down 43% in the past 12 months.

Motley Fool contributor Zach Bristow 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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