Scrap Metal M&A Market Update
U.S. steel producers, desiring control of raw material input, are acquiring local and regional scrap recyclers within close proximity of new mills. The BGL Metals & Metals Processing investment banking team dives deeper into this trend in our latest Metals research report.
“There are some regional spots where raw material is expected to be short, particularly down in Texas. So, we’ve seen a lot of activity in northern Mexico and southern Texas on the M&A side of scrap, and that’s expected to continue,” remarked BGL Managing Director Vincent J. Pappalardo. Steel Dynamics (NasdaqGS: STLD) completed the acquisition of ROCA ACERO, S.A. de C.V. (ROCA) in October 2022, which added five scrap processing facilities strategically located throughout Northern and central Mexico, with an annual processing capacity of approximately 850,000 gross tons. With the acquisition, SDI brings its combined annual ferrous and nonferrous scrap processing capability within Mexico to over 2.5 million gross tons. SDI CEO Mark Millett said, “Combined with our existing metals recycling facilities in Mexico, the addition of ROCA significantly strengthens our ferrous and nonferrous raw material procurement strategy in the region.” BGL, together with Global M&A partner RIóN Mergers & Acquisitions, advised ROCA in the sale.
Scrap Metal Facility M&A: Commercial Metals Company Acquires Kodiak Metals Recycling and Advanced Steel Recovery
Texas-based Kodiak Metals Recycling was acquired by Commercial Metals Company (NYSE:CMC) in November 2022. Based in the Galveston area, the scrap recycler has an annual processing capacity of 55,000 tons of ferrous and non-ferrous materials. CMC is also expanding West, announcing in January 2022 the construction of a new micro mill in Arizona with an annual capacity of 500,000 tons, the first combination merchant bar and rebar-producing micro mill in the world, according to a company release.
The September 2022 acquisition of Southern California-based Advanced Steel Recovery, LLC (ASR) furthers that strategic expansion, bringing 300,000 tons of additional ferrous scrap processing capacity to supply the new mill. CMC CEO Barbara Smith commented on the transaction, “The acquisition of ASR is a key strategic step to support CMC’s growth in the Western United States. Our Arizona 2 micro mill remains on-track to start up in early calendar 2023, and with the commencement of operations will come the need for a secure, cost-effective supply of ferrous scrap. ASR’s capabilities will help ensure that both of CMC’s world class mills in Arizona will have continued reliable access to vital raw materials.”
Scrap Metal Facility M&A: BlueScope Steel Purchases Milliron Recycling
BlueScope Steel (ASX:BSL) completed the purchase of Milliron Recycling in August 2022, which will secure additional feed for its recently expanded North Star minimill in Delta, Ohio. The recently completed $700 million facility expansion increases annual hot rolled coil production by 850,000 metric tons, representing a doubling of capacity. According to a statement from BlueScope to Recycling Today, the Milliron acquisition provides the company supply surety for a large portion of key feed product for the North Star minimill.
Milliron has a presence and expertise in both prime and obsolete scrap processing, reported Recycling Today. In December 2021, BlueScope acquired the ferrous scrap steel recycling business of MetalX for
$240 million, establishing BlueScope Recycling and Materials (BRM). MetalX’s Indiana and Ohio operating sites are immediately adjacent to BlueScope’s North Star facility in Delta, the company said. Commenting on the acquisition, BlueScope Steel CEO Mark Vassella said, “Using our strong financial position, moving upstream to acquire a scrap supply business helps underpin North Star’s supply chain and its great competitiveness. North Star will soon move from a two million tons per annum mill to almost three million tons per annum, and as the business expands, securing scrap is the right play.”
We expect consolidation in the metals industry to continue as participation from steel mills puts pressure on industry participants. The metals industry is still largely fragmented, with many small-scale and independently operated companies scattered throughout the United States. Many are family-owned with limited resources to manage volatility.
Looking for a more in-depth analysis of industry trends impacting M&A in the metals market? We invite you to review the full 22-page Metals industry Insider Report compiled by BGL’s Metals investment banking team.
Our Metals and Metals Processing Investment Banking team leverages an extensive network of relationships with the sector’s most acquisitive strategic buyers. We welcome the opportunity to learn how we can assist you in navigating today’s metals industry M&A climate and maximizing your strategic objectives. Please contact us using the form provided below.