The Novonix Ltd (ASX: NVX) share price has come off recent highs and is trading 12.82% down today at $5.71 apiece.
Novonix shares have marched downwards in the past week, after rallying almost 200% from July until the end of September.
Read on for more details.
Image source: Getty Images
What's pushing Novonix shares lower today?
Novonix shares have been trending down since 29 September and have given away 17% in gains during this time.
There hasn't been any market-sensitive news for the company. However, we can track the performance of the Novonix share price with the spot price of lithium, the battery metal that Novonix has exposure to.
Not much can be said about the price of lithium in 2021 other than it has shot out of the park over the last 12 months.
Prices for lithium contracts in the commodities markets have soared over 320% since this time last year to now trade at over US$25,000/tonne.
A huge up-step occurred in August, when lithium prices surged a further 80% to reach all-time highs of US$27,300 (at the current exchange rate) on 29 September.
Novonix's share price correspondingly jumped to its all-time high of $6.86 on 29 September, after storming higher from its 2 August price of $2.83.
The correlation between Novonix's share price and the price of lithium boils down to the fact that Novonix is an ASX resource share that produces a commodity.
That means it is a price-taker, in that it must accept the offered market prices (or forward prices) of the commodities market it sells into – in this case, lithium, via its battery anode segment.
Lithium pricing has made a reversal of US$1,705/tonne since its highs on 29 September, which isn't a small number in absolute or relative terms by any means.
Cross-checking this with Novonix's share price chart, it's easy to see the corresponding downward move on 29 September as the price of lithium began its descent.
This downward trend has rolled into the start of trade this week and, in light of this, would help explain why Novonix shares have slipped 11% into the red.
Novonix share price snapshot
The Novonix share price has been a tremendous outperformer on the ASX this year, booking gains of over 380% since 1 January.
This extends its gains in the past 12 months to over 475%, several times the return of the S&P/ASX 200 Index (ASX: XJO) rise of 25% in the same time.
