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From my understanding, the materials stock market sector consists of companies providing raw materials to other companies, such as oil, lumber, metals, etc. and the industrials stock market sector consists of companies which sell or use heavy machinery and equipment, such as airlines, railways, machinery companies, etc.

Why does the NASDAQ classify the steel/iron ore industry as part of the industrials sector and not the materials sector?

Aren't steel and iron ore raw materials and would thus be more relevant in the materials sector and not the industrials sector or am I mistaken?

EDIT: There are also some other industries that NASDAQ classified in the industrials sector that I'm confused about. For example, why is the precious metals industry in the industrials sector and not the materials sector and why is the broadcasting industry in the industrials sector and not the communication services sector?

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  • Which companies are you seeing in the Industrials sector that you feel should be in Materials? I see a few companies that produce steel parts in industrials which makes sense to me.
    – D Stanley
    Oct 18, 2022 at 21:19
  • From looking at the NASDAQ stock screener, they place the entire steel/iron ore industry in industrials sector (ACNT, ATI, CMC, CRS, FRD, GGB, GWAV, HSC, HUDI, HURC, NUE, NWPX, PKX, RS, SCHN, SID, STLD, TMST, USAP, X, ZEUS, etc.)
    – Krystal
    Oct 18, 2022 at 21:36
  • A lot of the companies you listed don't sell steel. Instead they take orders from you and manufacture the steel parts you designed.
    – slebetman
    Oct 19, 2022 at 6:10

2 Answers 2

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This article defines materials vs industrials as

Industrial stocks are primarily companies that produce or distribute machinery, equipment or supplies used in the manufacturing, construction or defense industries, says Rich Messina, senior vice president, investment product management at E-Trade Financial, a New York-based brokerage company.

"Materials stocks are largely involved in the processing or discovery of raw materials like oil, gold or chemicals," he says. "Most industries, including the industrials sector, rely heavily on materials companies."

I'll just pick the first three from the examples you provided in your comment...

ACNT

Ascent Industries Co. is a partnership of industrial manufacturing companies obsessively pursuing improvement and growth.

ATI

Our capabilities range from alloy development and vacuum melting to rolling, forging, powder and additive manufacturing, with high-value fabrication services to meet your needs.

CMC has a Wikipedia article. It seems to do scrap metal recycling according to that.

So these are companies that turn metals into metal products, they don't seem to be miners providing iron ore to other companies. BHP for instance is a miner of iron ore (amongst other things) and is in the materials group.

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Maybe NASDAQ is classifying organizations on their own, but it is my understanding that most investment sites use the NAICS classification system of the United States Department of Commerce which replaced the SIC classification system after NAFTA was enacted. A company can have one to many NAICS codes, the primary one should be the one associated with the most revenue. The first two and three digits of a NAICS code identify sectors at different levels of aggregation

Examples:

ACNT: 331210 Iron and Steel Pipe and Tube Manufacturing from Purchased Steel

ATI (Allegheny Technologies Incorporated): 331110 Iron and Steel Mills and Ferroalloy Manufacturing

CMC: 331110 Iron and Steel Mills and Ferroalloy Manufacturing

BHP: 212230 Copper, Nickel, Lead, and Zinc Mining

CLF: 212210 Iron Ore Mining

X: NAICS 331200 - Steel Product Manufacturing from Purchased Steel

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