PwC: Metals Deal Volume Slackened by Sluggish Global Economy

Mergers and acquisitions in the metals sector were down in Q2 2016, according to PricewaterhouseCoopers‘ Q2 2016 Global Metals M&A Deals Insights report. Total deal value was down a whopping 69% to $2.8 billion from Q2 2015.

PwC’s U.S.Metals Leader, Mike Tomaro said the global economy and unpredictable commodity markets have led to caution from metals firms contemplating major deals.

“It really does seem to exist outside of anything like normalcy,” Tomera said. “We are seeing a pickup in prices. A lot of that is, we think, driven by trade enforcement actions that have come out. The question is, will these prices stick or even maintain the upward trend? There’s speculation that they may not. There’s also speculation that this will drive change.”

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17 Deals were announced during Q2 2016, down 45% from the same quarter. Of the 17 deals, 12 deals were pending (forming 71% share) valued at around $2 billion during the quarter.

Completed deals were valued only at $0.7 billion in Q2 2016, the lowest observed of all quarters in the last two years. The largest deal was JiaoZuo WanFang Aluminum Manufacturing’s acquisition by
Hangzhou Jintou Jinzhong Investment Enterprise LP for $347 million.

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All premium metals categories (steel, aluminum and iron ore) saw weaker deal activity in the second quarter while the “other metals” category surged its share to 38% in total deal value (recording the highest share). Aluminum and steel together constituted more than half of total deal value.

“If you look at the volume of deals that happened this quarter – and the volume of deals in the first quarter – it really can’t get any slower than where we’re at right now from a deal perspective,” Tomera said.”It has got to start to pick up, especially on the steel side. The price pickup should translate into a better market, but whether that translates into more deal volume remains to be seen.”

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