Global metals deals insights: Q3 2017

Executive summary

The global metals industry has been divided in terms of performance this quarter: While aluminum prices reached their highest prices in close to six years, iron ore has entered a bear market after facing price volatility throughout the first half of 2017. Companies continue to be wary of investing in high-cost projects under the current unstable environment.

There were 16 deals announced in Q3 2017, with a total value of $5.4 billion. The Asia and Oceania region continues to drive M&A activity, as China’s supply-side reform program to reduce steel and aluminum overcapacity has led to restructuring, impacting demand and pricing. At the same time, Chinese demand has diversified into other industries as it reduces its dependency on national infrastructure. If commodity prices continue to rise under a low supply/high demand setting, we expect M&A activity to improve, which has steadily declined during the past year. US import restrictions could also come into effect under the current administration, further affecting production and demand.

Industry players will continue to focus on organic growth while commodity pricing remains volatile. However, as the global metals market continues to evolve, industry restructuring is expected in the future.

Key trends/highlights

  • Deal value for the first nine months of 2017 was $17.4 billion, 35% lower than the first nine months of last year.
  • There were 56 deals in the first nine months of 2017, a 3% decrease from last year.
  • The average deal size in Q3 was 34% lower than the quarterly average (from Q4 2014 to Q3 2017) of $508 million, indicating a preference towards smaller transactions as companies
  • The Asia and Oceania region continues to drive M&A activity, accounting for 81% of volume this quarter.
  • Aluminum surpassed the Steel category as the most active category this quarter, accounting for 50% of deal value and 31% of deal volume.
  • Deal value and volume remain the highest within country borders, as cross-border activity in the metals sector is restricted due to the localized and commoditized nature of the industry.

“While deal volume in the quarter was still largely driven by Asia and Oceania deals, deal value increased in other regions as a percentage of total activity, due to megadeals outside of China. If commodity prices continue to recover, metals assets outside of Asia and Oceania should become more attractive to potential investors.”

Brian Kelly, US Metals Deals leader

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Brian Kelly
US Metals Deals leader
Tel: +1 (216) 875 3121
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Michael Tomera
US TAS Market leader
Tel: +1 (412) 355 6095
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Jock O´Callaghan
Global Metals leader
Tel: +61 (3) 8603 6137
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