The value of mining and metal company deals in the third quarter slowed considerably, according to a recent report by PwC.
According to PwC’s most recent quarterly deals insight report, omnipresent concerns over global economic health — including the specter of recession — have loomed over dealmaking in the sector.
“The theme of uncertainty, which adversely impacted much of the year, has seemingly carried into the third quarter of 2019,” said Brian Kelly, PwC’s metals deals leader. “Concerns over a looming recession have the potential to exacerbate these unresolved issues and negatively influence deal activity through the remainder of 2019.”
Total deal value in the sector reached $3.2 billion in 3Q 2019, down 46% from Q2 2019. For the first nine months of the year, global deal value reached $25.6 billion, down 48% compared with the equivalent period in 2018.
A total of 147 deals were inked in Q3, down 9% compared with Q2 2019. Meanwhile, for the year to date, the 446 deals recorded marked a 15% decrease compared with the same period in 2018.
Average deal size dropped 45% to $40.8 million in Q3. For the year to date, average deal size checked in at $109.9 million, down 40% compared with last year.
The largest deal of the quarter came with Baosteel Hong Kong Investment Co. Ltd.’s acquisition of Maanshan Iron and Steel Co. Ltd. for $659 million.
“The uncertainties surrounding ongoing trade negotiations, retaliatory rounds of tariffs, and the health of the global economy have seemingly continued to hinder deal activity through Q3 2019,” the PwC report stated. “Overall, deal volume and deal value in the Metals sector declined both on the quarter-over-quarter and year-over-year basis, with deal value experiencing a severe decline.”
The report notes that although steel accounted for the largest year-to-date share of deal volume among metal subsectors, the sector faces several challenges that could weigh on the dealmaking climate.
Struggles in the automotive sector have contributed to lagging steel demand. In No. 1 automotive market China, the country’s automotive production fell 11.4% year over year during the January-September 2019 period, according to the China Association of Automobile Manufacturers. In the U.S., the UAW strike at General Motors (NYSE:GM) has impacted production; the two sides reached a tentative agreement earlier this month, but the proposed deal requires ratification by UAW members.
by Fouad Egbaria