Value creation trumps volatility in metals M&A, according to an industry report released by the Metals investment banking team from Brown Gibbons Lang & Company (BGL).

Government incentives like the Inflation Reduction Act and CHIPS and Science Act are encouraging investment in U.S. manufacturing, a swift response to the supply chain disruption brought about by COVID and the Ukraine conflict. This positive momentum for reshoring has the potential to accelerate growth for suppliers of raw materials as well as the downstream metals supply chain in North America.

Metals manufacturing is seeing strong secular demand in major end markets and stands to be an important beneficiary of the reshoring movement—with significant growth accelerators for fabricators. Private equity funds are taking notice by driving a highly active metals M&A environment. CORE Industrial Partners (Cadrex Manufacturing Solutions) and Tide Rock Holdings (Fabcon, Accu-Fab) are examples of acquisitive financial sponsors that are creating growth platforms with size and scale and are consolidating a highly fragmented landscape.

Downstream growth continues to be a motivator for metals industry M&A involving service centers with diversification a way to better navigate cyclicality and enhance margin. Olympic Steel’s recent purchase of Metal-Fab illustrates this trend, furthering the company’s strategy to reduce earnings volatility through value-added processing. Metal service centers are also looking to broaden product and geographic coverage with increased scale.

U.S. steel producers are expanding and dominating the scrap metal M&A landscape as they seek control of raw material input to feed new mills. Headlining transaction activity were Steel Dynamics (ROCA ACERO), Commercial Metals Company (Kodiak Metals Recycling, Advanced Steel Recovery), and BlueScope Steel (Milliron Recycling), each announcing transactions and capacity expansions in 2022. The Metals investment banking team at BGL expects consolidation to continue as participation from steel mills puts pressure on market participants.