Articles in Category: M&A Activity

aldorado/Adobe Stock

This morning in metals news, U.S.-E.U. trade tensions are again at the forefront with President Donald Trump’s recent threats at the World Economic Forum in Davos, a Chinese firm has purchased British steel trader Stemcor and Brazil’s Vale is off to a slow start this year.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Trump threatens E.U. with auto tariffs

At the World Economic Forum in Davos this week, President Donald Trump threatened to impose tariffs on automobiles imported from the E.U., marking another uptick in trade tensions as the president turns attention to Europe not long after inking a Phase One trade deal with China earlier this month.

Read more

bas121/Adobe Stock

This morning in metals news, a Turkish conglomerate is reportedly ready to step into the British Steel process if Jingye Group’s takeover effort falls apart, copper prices fell to a two-week low and an Indonesian company aims to augment its aluminum production.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Cengiz reportedly ready if Jingye’s British Steel bid falls apart

As Chinese firm Jingye Group attempts to push through its takeover bid of the liquidated British Steel, Turkish conglomerate Cengiz Holdings is ready to step in if talks fall apart, The Guardian reported.

Read more

Sunshine Seeds/Adobe Stock

This morning in metals, miner Rio Tinto recently released its Q4 production results, China unveiled new copper scrap and aluminum scrap regulations, and China’s Jingye Group has called on consultants to help strengthen its case for its British Steel takeover plans.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Rio Tinto’s iron ore shipments down 3%

Rio Tinto’s Pilbara iron ore shipments fell 3% in 2019 compared with 2018, the company recently reported.

Read more

Chris Titze Imaging/Adobe Stock

The Renewables Monthly Metals Index (MMI) gained two points for a January MMI reading of 98. (Editor’s Note: This report also includes analysis of grain-oriented electrical steel.)

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Several U.S. majors named in lawsuit over child mining of cobalt

CBS News reported last month that several U.S. tech companies were named as defendants in a lawsuit alleging the use of child labor in cobalt mining operations in Africa.

According to the report, citing a lawsuit filed in the U.S. District Court in Washington D.C., the companies named in the lawsuit as defendants included Apple, Google parent company Alphabet, Microsoft, Dell and Tesla.

According to the report, the lawsuit was brought by nonprofit group International Rights Advocates on behalf of 13 anonymous plaintiffs from the Democratic Republic of the Congo.

Read more

In early June, automakers Fiat Chrysler and Renault looked as if they were on the verge of a 50-50 merger that would have created a $35 billion global auto giant, the No. 3 automaker in the world.

But almost as soon as the deal seemed done, it collapsed.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Hemmed in by labor unrest, characterized most strikingly by the yellow-vest protests, Paris could not risk the loss of influence at the merged business. Its 15% shareholding in Renault would have been cut in half and with it any hope of stemming French jobs losses at a merged multinational operation.

A ‘European thing’

As Business Insider reported at the time, the proposed merger was largely a “European thing.”

FCA’s U.S. operations were and remain a cash cow, prospering on SUV and pickup sales; however, the Fiat brand has been a notable failure in the U.S. market.

Renault hasn’t been a factor in the U.S. since the early 1990s, and neither company is strong in China, the world’s largest car market.

So FCA went looking for a new partner and, ironically, seems to have found it in another French group: PSA, the owner of Peugeot.

Merger money

Fiat Chrysler and Peugeot agreed this week to a 50-50 merger to create the world’s fourth-biggest carmaker with revenues of €170 billion and a combined workforce of about 400,000. The intention  to invest in new technologies, such as electric vehicles (EVs), at a time of profound and challenging change in the automotive industry.

The Financial Times reports the merger of Peugeot and Fiat will form a group with recurring operating profits of more than €11 billion and sales ahead of General Motors and Hyundai-Kia.

The Financial Times went on to say, based on the firms’ current market capitalizations, the new entity would have an equity value of about €41.1 billion.

Despite targeting annual cost savings of around €3.7 billion, PSA and FCA said no plants would close as a result of the merger.

But no plant closures doesn’t mean no job losses.

The article quotes Ferdinand Dudenhöffer, of the CAR-Center Automotive Research at Universität Duisburg-Essen, who said PSA’s Opel unit would be the “loser” in the merger and predicted at least 10,000 engineering job losses overall. “Opel’s role in the new group will become weaker. [It will have to] fight alongside mass-market brands Fiat, Citroën and Peugeot for the same customers,” he is quoted as saying.

Challenges ahead

FCA and PSA are not alone in facing profound challenges over the next few years created by looming legislation led by Europe over emissions targets.

The pressures on automakers are being exacerbated by a slowdown in the global automotive market, just as cash flow is being squeezed by the massive investment required for a switch to electric vehicles.

In an upcoming article, we will explore the dichotomy automakers in Europe are facing. Driven by legislation to reduce average fleet emissions, automakers are bringing a wave of new EV models on to the market, but the general public remains wary of EVs and is not making the switch (except in a few incentive-driven countries).

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

The FCA-PSA merger may give the combined group the financial clout and resources to make the aforementioned transition.

But until the paying public can be persuaded to change, government legislation might create the greatest challenge to carmakers in the new decade.

ronniechua/Adobe Stock

This morning in metals news, the U.S. House of Representative approved the United States-Mexico-Canada Agreement (USMCA) with bipartisan support, Katanga Mining is acquiring land rights from Gecamines and China’s antitrust authority granted approval to Novelis for its proposed acquisition of Aleris.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Bipartisan vote powers USMCA to approval

After many months of back and forth, the U.S. House of Representatives has finally approved the USMCA.

The House approval came via a bipartisan effort, with 193 Democrats and 192 Republicans voting in favor; 38 Democrats, two Republicans and one Independent voted against the trade deal.

The vote came after the White House and House Democrats earlier this month announced an agreement on revisions to the trade deal, which will supersede the 1994 North American Free Trade Agreement (NAFTA).

In order for the USMCA to go into effect, each country’s legislature must ratify the deal. Mexico ratified the deal earlier this year, leaving Canada as the lone pending approval.

“The USMCA is expected to create between 176,000 and 589,000 new American jobs and substantially increase economic growth,” United States Trade Representative Robert Lighthizer said in a prepared statement. “The International Trade Commission’s analysis shows that USMCA will have a more positive impact on our economy, jobs and wages than any other U.S. trade agreement ever negotiated.

“It will create tens of thousands of new jobs — many importantly in manufacturing—and increase export opportunities for our farmers, ranchers and businesses. President Trump is keeping his promise to replace the failed NAFTA with a far better trade agreement. Thanks to his leadership and the work of Republicans and Democrats in Congress, the USMCA represents the gold standard in U.S. trade policy and will be the template for U.S. trade agreements going forward.”

Katanga to buy land rights from Gecamines

Katanga Mining, a unit of miner Glencore, will buy land rights in the Democratic Republic of the Congo from state-controlled miner Gecamines, Glencore said.

Katanga Mining’s 75% mining subsidiary Kamoto Copper Company (KCC) entered an agreement with Gecamines (which is a 25% partner in KCC) to acquire from Gécamines “a comprehensive land package covering areas adjacent to KCC’s existing mining concessions.”

According to Glencore, KCC will pay up to U.S. $250 million for the land acquisition.

Chinese antitrust authority gives Novelis green light for Aleris acquisition

Aluminum roller and recycler Novelis announced Friday that China’s State Administration for Market Regulation had approved the company’s proposed takeover of Aleris.

“This is a significant step forward in uniting these two world-class manufacturing companies,” Novelis President and CEO Steve Fisher said. “The approval we have received from China will allow us to further enhance our strategic position in Asia and diversify our overall product portfolio.”

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Novelis will also sell the Aleris plant in Duffel, Belgium, to an independent third party as part of the approval, the company said.

It may have taken well over 850 days for its culmination, but the recent completion of an acquisition in India is being touted as the “single-biggest recovery” under the Insolvency and Bankruptcy Code (IBC) process in India.

Earlier this week, global steel giant ArcelorMittal announced it had formally completed the acquisition of debt-ridden Essar Steel India Ltd (ESIL).

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Going ahead, the LN Mittal-led company also announced a joint venture with Nippon Steel, called AM/NS India, to own and operate the debt-ridden Essar.

ArcelorMittal holds 60% of AM/NS India, with Nippon Steel holding the balance.

Last month, the Supreme Court of India cleared the decks for the acquisition of Essar, which is mired in multimillion-dollar debt.

On taking over, the co-owners have announced their resolve to “play an active role in the Indian steel market.” They have decided to step up capacity at the plant from the current 9.6 million ton per annum (mtpa) to 12 or 15 mtpa, according to LiveMint.

As widely reported in the Indian press, Lakshmi Mittal, chairman and chief executive of ArcelorMittal, said this acquisition was an “important strategic step for ArcelorMittal.” India, he added, was an attractive market, and ArcelorMittal had been on the lookout for opportunities to build a meaningful production presence in the country for over a decade.

What attracted it to ESIL was its sizable, profitable, well-located operations.

Incidentally, AM/NS India is an integrated flat steel producer and the largest steel company in western India. Its current level of crude steel production is about 7.5 mtpa against a 9.6 mtpa capacity.

Following the completion of the acquisition process, ArcelorMittal has initiated payment of the dues. Payment from ArcelorMittal has started flowing, with all payments likely to be cleared soon, Business Today reported.

For many years, AM/NS has been investing in countries like the U.S., Brazil and Japan. Its India plans include an intention to increase finished steel shipments to 8.5 mtpa over the medium term, The Hindustan Times reported. This will be achieved by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains — and then through the commissioning of additional assets — while simultaneously improving product quality and grades to realize better margins, the company said in a statement.

The promise after this major acquisition of adding more steel to India’s total production may all be fine — but in the face of a slow growth, what will this additional capacity do to it is a question on every analyst’s mind.

Domestic steel prices have fallen by around 10% since the start of 2019. Domestic demand has also slowed, and is estimated to fall to 4-5% this fiscal from the 7.5-8% growth recorded in the previous two years, given muted construction investments and weak automotive market,” according to Crisil.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

All hopes are now pinned on an infrastructure boost promised by the Indian government as part of a larger package aimed at spurring economic growth, which, in turn, could fuel steel consumption.

photonewman/Adobe Stock

This morning in metals news, Alcoa announced the closure of its Point Comfort alumina refinery, Glencore makes an acquisition and Alro Steel will open a new facility in February 2020.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Alcoa to close Point Comfort refinery

Alcoa announced this week it plans to permanently shutter its Point Comfort alumina refinery in Texas.

The plant, which boasted an annual alumina capacity of 2.3 million tons, has been fully curtailed since June 2016.

“In October of 2019, Alcoa announced that it was conducting a review of its global production capacities to drive lower costs and sustainable profitability,” the company said. “The review includes 4 million metric tons of alumina capacity, or approximately 27 percent of the Company’s total global refining capacity.”

Glencore to buy LNG business

In other company news, Glencore has announced it has reached an agreement to acquire the liquefied natural gas (LNG) business of Orsted A/S.

“The agreement will involve Glencore novating a number of contracts, including the right to use 3bcm of annual regasification capacity at the Gate terminal in Rotterdam until 2031,” Glencore said. “The agreement also includes a number of LNG supply contracts.”

Alro Steel to open new Oshkosh facility

Meanwhile, Alro Steel announced construction on a new plant in Oshkosh, Wisconsin, is expected to be completed in February 2020.

The new 200,000-square-foot facility will replace Alro’s older, 54,000-square-foot plant in Oshkosh.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

“This will allow Alro to expand our product offerings and processing capabilities and focus on cut-to-size metals with next day delivery to Wisconsin customers,” the company said in a release.

Destina/Adobe Stock

This morning in metals news, the United States Trade Representative outlined the mini-trade deal reached with China late last week, ArcelorMittal and Nippon Steel completed their acquisition of Essar Steel, and the Pilbara Ports Authority saw its November throughput increase 8% year over year.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Trade deal calls for China to make ‘substantial additional purchases’ of U.S. goods

Late last week, the U.S. and China announced they had reached a deal in principle on a mini-trade deal that would see the U.S. pull back on $160 billion in tariffs on Chinese goods in exchange for the latter’s agreement to purchase more U.S. agricultural goods.

In 2017, U.S. agricultural exports to China reached $23.8 billion, accounting for 17% of all U.S. agricultural exports. The U.S.’s agricultural exports reached a high of $29.4 billion in 2013.

In an interview Sunday on CBS’ “Face the Nation,” United States Trade Representative (USTR) Robert Lighthizer said agricultural exports to China are expected to reach between $40 billion and $50 billion annually over the next two years, Reuters reported.

While the text of the agreement itself has yet to have been made public, the USTR summarized the deal in a release Friday.

“The United States and China have reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange,” the USTR said. “The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement. The United States has agreed to modify its Section 301 tariff actions in a significant way.”

According to the USTR fact sheet, the deal includes chapters covering: intellectual property, technology transfer, agriculture, financial services, currency, expanding trade and dispute resolution.

ArcelorMittal, Nippon complete Essar acquisition

After a long and winding process that has played out in the courts over the last two years, ArcelorMittal and Nippon Steel have finally completed their acquisition of the insolvent Indian steelmaker Essar Steel.

The joint venture will be called ArcelorMittal Nippon Steel India Limited, which will run Essar Steel; ArcelorMittal owns 60% of the joint venture, with Nippon holding the balance.

“The acquisition of Essar Steel is an important strategic step for ArcelorMittal. India has long been identified as an attractive market for our company and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade,” ArcelorMittal Chairman and CEO Lakshmi Mittal said. “Both India and Essar’s appeal are enduring. Essar has sizeable, profitable, well-located operations and the long-term growth potential for the Indian economy and therefore Indian steel demand are well known. The transaction also demonstrates how India benefits from the Insolvency and Bankruptcy Code, a genuinely progressive reform whose positive impact will be felt widely across the Indian economy.”

PPA sees November throughput rise 8%

Australia’s Pilbara Ports Authority recently reported November shipments increased 8% on a year-over-year basis.

Total throughput for the 2018-2019 fiscal year reached 291.5 million tons, marking a 2% year-over-year increase.

Port Hedland, a critical iron ore terminal, saw throughput of 43.8 million tons (43.3 million tons of which was iron ore), which marked a 9% year-over-year increase.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Meanwhile, imports of 158,000 tons in November at Port Hedland marked a 45% year-over-year increase.

Vertical integration may play well in classic corporate HBR (Harvard Business Review) circles, but steel industry observers may have a hard time envisioning the synergies Cliffs outlined in its merger announcement and presentation Dec. 3, creating a best-in-class, EBITDA-maximizing combined Cliffs-AK Steel entity!

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

To us, the best rationale for the deal appears on slide 14, outlining AK Steel’s short-term debt position:

If you buy the notion that Cliffs can swallow AK and convert that company’s debts to its own and save on interest expense, then score one for the deal!

So why would Cliffs buy AK Steel?

A compelling reason appears on slide 11:

Despite AK Steel’s relatively improved financial performance under the leadership of CEO Roger Newport, if AK Steel represents ~30% of Cliff’s annual iron ore sales, Cliffs faces significant “customer concentration risk.” In other words, the health of AK Steel would significantly — negatively — impact Cliffs.

Forget about “renewal risk” — let’s just call it “customer risk.”

Cliffs would be hosed without a healthy AK Steel!

What about AK’s Ashland Works?

We continue to see different public announcements from AK Steel about the cost of Ashland Works. The Ashland Works facility today operates a hot-dipped galvanizing line (the blast furnace was idled nearly four years ago).

According to comments from AK Steel directly, “…the company announced it would close the ‘largely-idled’ Ashland Works facility by the end of 2019 to ‘increase utilization’ at its other U.S. operations. The plant employs 230 people and the closure would yield approximately $40 million in annual cost savings, according to the company.”

But by keeping it open, as detailed by Cliffs, the Ashland Facility, “Eliminates up to $60m of closure-related costs.” The Ashland facility will instead undergo a conversion, which it says, “Potentially provides a compelling, low-capex, high-return opportunity to be a significant merchant pig iron supplier in the Great Lakes.” (We presume U.S. Steel and ArcelorMittal will avail themselves of this compelling offering.)

So, we’re not sure if keeping Ashland Works open saves money or if closing it does.

We won’t pontificate over the “AK Steel best-in-class position in non-commoditized steel” for a variety of reasons that we have previously covered here in our GOES MMI series. (Or the fact that the rise of electric vehicles will start to make a dent in the need for the kinds of automotive exhaust grades, such as 439 and 441, produced by AK Steel.) We acknowledge AK does have a strong position in ultra-high-strength steels.

So, the real question comes down to the “synergies” outlined by Cliffs.

Does the margin Cliffs generates — approximately $30/$40 per short ton for every pellet produced and sold to AK — translate to an EBITDA jump of that same amount for steel products sold by AK, such that they leapfrog the EAF producers, as Cliffs suggests?

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

Well, now isn’t that the $1.1 billion question?