The combined market capitalization for a pool of over 2,400 metals and mining companies has dropped year over year for three straight months in 2023, with aggregate valuations down for nine of the past 12 months, data from S&P Global Market Intelligence showed.

The monthly aggregate market cap of miners has fallen by at least 10% year over year since February. The total valuation of metals and mining companies sank 18.4% year over year to $2.09 trillion in March 2023, the largest percentage drop during the 12-month period.

The decline has been driven by the downward trend in metals prices following price rallies in 2021 and 2022, analysts told S&P Global Commodity Insights.

"Rising prices in 2021 through April–May of 2022 provided significant support for commodity companies in the equity markets," said Mark Ferguson, director of research for metals and mining at Commodity Insights. "Prices then came off their highs, pressuring valuations."

Before the miners' combined market cap declined, their total valuation increased year over year for 17 consecutive months from January 2021 to May 2022. During the period, commodity prices rose on the back of economic recovery from the COVID-19 pandemic. Russia's invasion of Ukraine on Feb. 24, 2022, also sparked supply concerns that kept prices elevated.

Valuations then fell for five consecutive months from June 2022 to October 2022 as metals prices cooled amid recession concerns and surging inflation. Speculation about China's potential unwinding of strict pandemic restrictions drove market optimism in late 2022 and early 2023, but inflationary pressures eventually tempered the rally.

– Check miners' median valuation in April. – Read the latest Metals and Mining Research's consensus metal price forecasts.

"Although they have been volatile over the past year, commodity prices including iron ore, copper, nickel, met coal and thermal coal are generally lower now than they were 12 months ago," said Jon Mills, a mining equity analyst at financial services company Morningstar.

"Moreover, like in many industries, inflation is sweeping through the mining sector, and this has pushed up unit cash costs due to higher labor, fuel, logistics and other charges. Together, these are negative for miners' margins," Mills added.

Despite falling valuations of miners, Ferguson remains bullish on the outlook for the sector for the remainder of 2023.

"There could be volatility in the markets in the near term as participants balance out economic risks, but the overarching demand for many commodities should begin to return later this year, benefiting mining companies' equity market positions," Ferguson said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.