Pilbara Minerals Ltd (PLS.AU) shares plummeted 5.02% in intraday trading on Friday, following a downgrade by Citi analysts. The stock's sharp decline comes as the investment bank revised its outlook on lithium prices, leading to a reassessment of several Australian lithium producers.

Citi has lowered its lithium price forecasts for the next three years by 15%-20%, citing the need for "prolonged lower-for-longer prices" to rebalance the market. As a result, the bank has downgraded Pilbara Minerals from a 'buy' to a 'neutral' rating. This bearish view on lithium prices represents the most significant revision in Citi's recent commodity price projections.

The impact of this outlook extends beyond Pilbara Minerals, affecting other players in the Australian lithium sector. Citi has also downgraded IGO to neutral from buy and Liontown Resources to sell from neutral. The bank's revised spodumene forecast for the next three months has been cut to $600 per metric ton from the previous $700 per ton, indicating a challenging near-term environment for lithium producers.