The materials sector continues to see red as macroeconomic pressures continue

The material stocks fell over -23% in the first nine months of 2022 compared to around -24% Decline for the S&P 500 and SPDR S&P 500 Trust ETF (SPY). Materials Select Sector SPDR ETF (XLB) was also around below -23% during the period and fell -7.35% in Q3.

Industrial metals had a tough six months and in the third quarter the sector continued to be impacted by ever tighter supply conditions. On the London Metal Exchange, the three-month close for copper (HG1:COM) is almost down -9%. According to Reuters, benchmark LME copper recently traded -0.8% at $7,375/metric ton after falling as low as $7,292, its lowest level since July 21.

Meanwhile, LME aluminum prices (LMAHDS03:COM) continued to fall to new 18-month lows and fell -10% in Q3. Metals continue to be weighed down by ongoing fears of a global growth slowdown, weaker demand and a higher dollar.

Aluminum consumption and prices are likely to remain under pressure as growth slows, and a production ramp-up in China is also weighing on prices.

Lumber prices (LB1:COM) have fallen by more than -60% YTD to its lowest in more than two years and a recovery looks unlikely as higher interest rates and inflation are likely to continue to hurt single-family home demand.

The rate at which new US homes are being built is declining -13% starting in April, when housing activity hit its highest level in more than a decade, according to the Census Bureau.

Three-month Comex Gold (XAUUSD:CUR) also recently hit a fresh two-and-a-half year low, falling almost 9% in the third quarter. Silver (XAGUSD:CUR) also closed -9% at $18.84/oz as the dollar surged against major currencies and fears mounted that central bank tightening could trigger a global recession.

The dollar hit a 20-year high, hurting demand for dollar-priced bullion, while benchmark 10-year yields rose to their highest levels since April 2010.

“Risks of a hard landing are heightened and this has continued to drive flows into the dollar, which was bad news for gold,” said Edward Moya of Oanda.

Let’s take a look at the top-performing materials stocks ($2bn market cap or more) for Q3.

• Sigma Lithium (SGML) +76.56%; Lithium stocks made up four of the top five gainers amid rising lithium prices. The metal has skyrocketed nearly 500% over the past year thanks to tight supply and rising demand for electric vehicles.
• Livent Corp (LTHM) +35.08%
• Lithium Americas (LAC) +30.30%
• Albemarle (ALB) +26.54%
• CF Industries (CF) +12.27%; The stock rallied on strength in fertilizer prices, which are expected to remain elevated for the foreseeable future.

The worst performing materials stocks ($2B market cap or more) were:

• Scott’s Miracle Gro (SMG) -45.88%; Margins and growth have declined for the agribusiness this year, with financial results falling short of market expectations.
• Avant (AVTR) -36.98%; Shares have recently fallen on guidance cuts.
• Braskem (BAK) -31.79%; Shares are down nearly 51% year-to-date, despite SA writers and Wall Street rating the stock as a “buy.”
• Newmont (NEM) -29.56%; The stock is among several precious metals movements that have come under sustained pressure from a fall in the price of gold.
• Alcoa (AA) -26.15%; Shares are down 45% year-to-date on aluminum weakness.

Other material ETFs to keep an eye on: iShares Global Timber & Forestry ETF (WOOD), Materials Select Sector SPDR ETF, Vanguard Materials ETF (VAW), iShares Global Materials ETF (MXI), SPDR S&P Metals and Mining ETF (XME), VanEck Vectors Gold Miners ETF (GDX), iShares MSCI Global Gold Miners ETF (RING), Global X Copper Miners ETF (COPX).