Why ASX Critical Mineral Stocks Are Sliding Despite Strong Long-Term Tailwinds

Investors may be wondering why critical mineral stocks like Novonix (ASX: NVX), one of the more talked-about names in the battery and critical minerals sector, has seen its share price pull back recently. In reality, it’s not just Novonix that’s under pressure. We’re seeing a broad-based sell-off across the ASX critical minerals space, as traders unwind some of the strong gains that built up over the past few months.

The sector has benefited from huge tailwinds, with enthusiasm around electrification, US policy support, and supply chain security all driving valuations higher. But when markets rally this fast, it’s natural to see a period of profit-taking as both retail and institutional investors lock in gains.

The recent catalyst has been the preliminary trade agreement between the U.S. and China, which effectively paused further tariffs and eased rare earth export tensions. While that’s positive for global trade stability, it’s also taken some of the urgency out of the critical minerals trade, leading to short-term rotation away from the sector.

From our perspective, this pullback feels more like a reset in sentiment than a shift in fundamentals. The long-term story for battery materials and decarbonisation supply chains remains intact.

What are the Best Mining ASX Stocks to invest in right now?

Check our buy/sell tips

US – China Trade Pause Sparks Profit-Taking in Critical Minerals, But Long-Term Thesis Remains Intact

US President Donald Trump had previously threatened to impose 100% tariffs on all Chinese imports starting on November 1. Those tariffs are now on hold, meaning prices on Chinese goods will not surge suddenly as initially feared.

On the other side, China had been preparing to tighten export controls on rare earths and magnets, key materials used in defence, EVs, and semiconductors. However, Beijing has decided to delay these restrictions for another year while it reassesses its policy direction.

In simple terms, this pause signals a temporary easing of trade tensions between the two countries. For investors, this means the urgency for US and ASX-listed critical minerals and manufacturing companies to accelerate production and financing has softened in the short term.

However, this should not be mistaken for a trend reversal. According to CNBC, the current market movement reflects profit-taking rather than a shift in fundamentals. The long-term investment thesis for these sectors remains intact, as national security concerns and supply chain dependencies on China continue to pose strategic risks for the United States.

What Investors should take away from this article

For investors, we see this as a buying opportunity for long-term thinkers who believe in the structural importance of the critical minerals theme. The sector has experienced sharp short-term pullbacks with major names like Novonix, Lockley Resources, and Dateline down between 12 and 20 percent despite no change to their long-term fundamentals. This looks like a classic “buy the rumour, sell the news” reaction, where investors take profits even on positive developments.

Looking ahead, US President Donald Trump and Chinese President Xi Jinping are scheduled to meet on Thursday at the APEC Summit in Gyeongju, South Korea, to finalise the framework of the trade agreement. While the US administration has signalled optimism, Beijing has remained quiet so far, leaving markets cautious until the deal is formally confirmed.

In our view, the recent sell-off appears sentiment-driven, not structural.