Join        Login             Stock Quote

Busy M&A To Come In The Metals Sector

 March 16, 2012 03:28 PM

By Commodities Now

The global metals deals industry is soaring back to success with near historic value highs of US$40.7bn in 2011, up 56% year on year (YOY), according to a new report published today by PwC. In its annual in-depth metals M&A review and forecast, Forging Ahead, experts say the industry is rebounding strongly from its post credit-crunch low and is now averaging more than 500 metals deals a year - Commodities Now.
In 2011 there were 533 total deals with an aggregated value of US$40.7bn, compared to 2010's 547 deals amassing US$26.1bn. This is significantly above the pre-credit crunch highest volume of 411 in 2007.  Looking back to 2009 this value reached a low of US$15.1bn. 
Jim Forbes, global metals leader, PwC, said: "This report shows for the first time, our in-depth forecasting methodology which tested the historical relationship of metals M&A along with a variety of macroeconomic variables, to predict a jump of 11% in deal numbers and 7.6% in deal value for 2012. Overall, PwC forecasts moderate growth in the deals market but momentum will continue."
Despite these strong building blocks, the report stresses that caution will be the ‘watchword' for 2012 as all eyes will be on how the eurozone crisis plays out, the stability of the US economy, developments in Chinese real estate, which is responsible for almost half of deal activity there, and its construction sector. PwC model forecasts 11% increase in deal numbers and 7.6% in deal value for 2012
  • Deal value now 170% up on 2009 and 56% up on 2010 (US$)
  • Eurozone crisis could spur consolidation in 2012
  • Battle to secure and own raw materials set to continue
  • Expansion in energy sector is a bright spot for steelmakers

Raw materials, security of supply and the entire supply chain itself will continue to be a major M&A theme. With China reportedly producing the vast majority of rare earth metals, concerns have been raised over how these and other raw materials, are sourced, exported and controlled.

Jim Forbes, global metals leader, PwC, said: "Supply chain security will be a big theme for the industry. Metals companies will continue to seek greater certainty over raw materials and we are already seeing the emergence of manufacturer alliances which will allow companies to pool investment."

Other key areas to lookout for will be the performance of the US economy, which if it weakens could dampen the outlook for China deals, the report says. China, by its sheer size and stature in the metals market will also undoubtedly remain one of the key global drivers in the metals deals sector as more than half of global iron ore trade is bought by the nation.

China's steel sector is primed to undergo a long awaited consolidation with India also expected to follow suit after a landmark deal last year.

Deal Breakdowns

In North America, deals rose by almost a third and value quadrupled, giving it the largest share of worldwide metals deals value. There were 118 deals in 2011 at a value of US$12.2bn compared to 90 deals in 2010, valued at US$3.1bn.

There were 176 deals completed in Europe (including Russia). Deal value shot up 518% for western Europe and 125% for central and eastern Europe YOY, reaching US$11.4bn, the lion's share of which came from four key deals. European metals firms continue to face higher raw materials and energy costs and EU steel production as a whole rose 2.8% YOY compared to 6.8% globally.

In Asia, steel production rose by 7.9% in 2011, but crude steel down by 1.8%. There were 206 deals in total valued at US$7.3bn compared to 239 deals in 2010 valued at US$11.5bn. Undoubtedly, the Japanese earthquake and tsunami had a major impact.

Deals for Central and South America accounted for almost a quarter (24%), of total metals deals value in 2011. Brazil delivered the vast majority of 2011 deals in the region accounting for a total of US$9.8bn worth of deals. Deal activity was dominated by raw materials investments mostly by buyers outside the region. In total, 2011 saw 33 deals concluded which was the same for 2010 but deal value stood at $US9.8 in 2011.


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.