Why is the Arafura share price crashing 9% today?

This rare earths developer's shares are starting the week in the red…

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The Arafura Rare Earths Ltd (ASX: ARU) share price is having a tough start to the week.

In afternoon trade, the rare earths developer's shares are down 9% to 41 cents.

Why is the Arafura share price dropping?

Investors have been selling down the Arafura share price today despite there being no news out of it.

However, it is worth noting that prior to today, the company's shares were up 50% since this time last month.

This could mean that some investors are taking a bit of profit off the table. Particularly given broad weakness in the materials sector today.

This has seen the likes of Core Lithium Ltd (ASX: CXO), Leo Lithium Ltd (ASX: LLL), Liontown Resources Ltd (ASX: LTR), and Talga Group Ltd (ASX: TLG) tumble deep into the red today.

What's going on?

This weakness may have been caused by concerns that soaring COVID cases in China could put pressure on battery materials demand in the key market.

Though, with the Arafura share price up a massive 80% since the start of the year, longer term shareholders aren't likely to be too concerned by today's pullback.

Those gains have been driven by excitement over the company's Nolans project in the Northern Territory. For example, it recently signed offtake agreements with Hyundai and Kia for neodymium-praseodymium from Nolans.

Motley Fool contributor James Mickleboro 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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