You cannot short a lithium price. There is no liquid contract for the spodumene that comes out of Western Australia's pits, no clean way for a hedge fund to bet the battery-metal boom was overdone. So the bears did the next best thing: they shorted Pilbara Minerals. For years the largest, most liquid pure-play producer on the ASX was the market's proxy for the entire lithium trade — and, more often than not, its single most-shorted stock. 1
They had reason. The 2021-22 mania minted a generation of battery-metal darlings, then the bust took it all back: spodumene concentrate collapsed from around US$8,000 a tonne to under US$1,000 in barely a year as EV subsidies were wound back and new supply swamped softening demand. More than $15 billion evaporated from ASX lithium stocks; Pilbara halved, Mineral Resources fell two-thirds, and mines were quietly put into care and maintenance. Short interest in Pilbara climbed from roughly 11% in late 2023 to a remarkable 20% a year later. 1
The proxy short
Because the bet was always really about the commodity, Pilbara dragged the rest of the basket with it — Liontown, Mineral Resources and IGO rotating through the most-shorted list alongside it. At its worst the materials sector accounted for almost two-fifths of all short interest on the exchange. The lithium short was never a view on any one company; it was the cleanest way to be bearish on the energy transition itself.
The squeeze
Then the commodity bit back. A supply shock through late 2025 and early 2026 — Zimbabwe's February ban on lithium-concentrate exports, worth perhaps 7% of global supply, layered on top of delayed Chinese restarts — drove spodumene from around US$600 a tonne to above US$2,000. 2 The rally ran straight into the most crowded short on the market. As the price tripled, fund managers noted the bears had barely covered, and the squeeze did the rest: Pilbara's short interest fell from nearly 13% a year ago to roughly 7% a quarter ago as positions were torn up and the stock ran back toward $6. 3
Creeping back
Here is where it gets interesting. The shorts are not gone — they are returning. Pilbara's short interest has climbed back from that 7% low to 10.3% over the past quarter, even as the price has held. The bears that got squeezed are re-shorting into the recovery, betting the spike is speculative excess: the Zimbabwe ban can be lifted, the Chinese restarts will come, and a market that tripled on supply scares can deflate just as fast.
The bulls have an answer. Macquarie calls the recent weakness sentiment-driven rather than fundamental, and Pilbara remains one of the lowest-cost producers in the world, profitable across most of the price cycle. That is the whole tension of the lithium trade in a single stock: the same leverage that delivered triple-digit gains is the leverage that erased them once before.
The same leverage that delivered triple-digit gains is the leverage that erased them once before.
The bears have been burned here. They are lining up to try again.