Shares in lithium-ion battery manufacturer Magnis Energy Technologies Ltd (ASX: MNS) are off to a flying start to the week and are now trading 13% higher at 69 cents.
Magnis shares are on the up today despite there being no market-sensitive information for the company.
With that in mind, let's take a closer look at what's fuelling Magnis Energy shares this past week.
What's up with Magnis Energy shares lately?
The Magnis Energy share price has been gaining ground since the company released a project update late last month.
Magnis advised that its 60% owned venture Imperium3 New York had received approval for an Aquifer Permit.
This is the crucial last step in the approval process for Imperium3, a lithium-ion battery plant located in New York. Earlier this year, the company raised almost $20 million to part-fund the project.
As a result of the approval, the plant is now fully funded to begin commercial production in the lithium-ion battery cell manufacturing market with a scale of up to 1.8 GWh.
This appears to be important news for Magnis as it aims to "become a leading global producer of next generation green credentialed lithium-ion battery cells", according to the company.
The release of Magnis' quarterly activities report for the period ending 30 September 2021 also sent shares higher when the company presented it last week.
In its report, the company advised that Imperium3 "as of end of September is 33% complete, and has completed several milestones" on its road to production.
It also announced further binding offtakes with its subsidiaries – including Imperium3 – which "include an agreement with Anglian Omega subsidiary Omega Seiki, producer of electric three-wheelers in India" alongside a US government supplier.
Magnis also expects to see fully-automated production at the Imperium3 site by 1H 2022 after phasing out its "semi-automated process" by the end of this calendar year.
Investors have piled into Magnis shares on the back of these price-sensitive updates over the past few weeks.
What else is weighing in?
Aside from this, the spot price of lithium has also rallied once more since we rolled from October into November.
In the last two weeks, the price of lithium has climbed a further 5%, or around A$2,000/tonne, to reach another all-time high of A$41,078/tonne.
The lift in lithium prices bodes well for the Magnis Energy share price. This is because Magnis is classified as an ASX resource share by GICS Sub-Industry Classification. This means it has exposure to lithium via its battery technology subsidiaries.
It is the dynamic between demand and supply that is driving up the price of lithium in 2021 – demand for lithium-style batteries, specifically.
This cause-effect has sent the price of lithium soaring in 2021, according to analysis from Goldman Sachs, the International Energy Agency, FactSet, Statista, Roskill, CRU Group, and Bloomberg Intelligence.
It is widely agreed this surging demand is because batteries will use a good chunk of the lithium produced around the globe.
An increase in the demand of lithium-type batteries (thus driving up the price of lithium) is therefore a net positive for Magnis and its margins, according to these experts.
Reuters confirms this dynamic in a report on Magnis Energy from 3 August 2021. It states: "The lithium-ion battery sector is benefitting from rising prices of the raw material [lithium] amid robust demand".
An analyst at global commodities expert CRU Group, James Jeary, was also quoted as saying rising lithium prices are likely to draw in new investment to the lithium-ion battery supply chain.
Not only that, Magnis' "Nachu Graphite Project has been reported as the largest mineral resource of large flake graphite in the world", according to the company.
In fact, although it reported a net loss of more than $16 million in FY21, graphite exploration and development contributed 97% to what income it generated.
The price of graphite has also increased year on year across all grades, which also bodes well for the company.
So, with Magnis Energy having exposure to these commodities, its share price can and does fluctuate with volatility in the broader commodity and lithium markets.
With this in mind, and in the absence of any other price-sensitive information, it stands to reason that Magnis Energy's share price is faring well on the back of this momentum in the battery metal and, in particular, the company's recent trading updates.
Magnis Energy share price snapshot
The Magnis Energy share price has posted outsized returns over the past 12 months of 263%, after rallying 245% this year to date.
These returns are a galaxy ahead of the benchmark S&P/ASX 200 Index (ASX: XJO)'s gain of around 23% in that time.
