Metals industry deal-making fell away sharply in 2008 as world demand fell and prices plummeted, according to an annual review of the metals industry released Tuesday by PricewaterhouseCoopers.

Average deal value in the first half of 2008 was US$301 million compared to US$318 million in first half of 2007. In the second half of the year, average deal value plummeted to US$125 million and total deal value fell from a high of US$51.1 billion in Q3 2007 to a tenth of this level a year later.

“The year in metals M&A deal-making saw a dramatic and sudden about-turn,” says Jim Forbes, global metals leader at PwC. “Optimism that China would continue to compensate for downturns elsewhere was replaced by increasing concern about a weakening in global demand, including China.”

The big deals worth over US$10 billion were nowhere to be seen despite dominating metals deal activity in 2006 and 2007. This led to total deal value plunging from the record US$144.7 billion in 2007 to US$60.6 billion in 2008.

North America metal M&A activity fell sharply with the number of steel and aluminum deals being halved and the total value of deals dropped steeply from US$76.7 billion in 2007 to US$15.8 billion in 2008. Three quarters of North American metals deal value came from cross-border transactions, 83% of it for steel targets. The largest North American deal was Russian steelmaker Evraz’s US$4 billion purchase of the North American tubular operations arm of IPSCO from Swedish steel producer SSAB.

Similar record increases were recorded in South America, spurred by a flurry of deals for Brazilian iron ore assets. Although only accounting for 8% of all deals, they contributed to 24% of worldwide metals deal value. Total deal value in the region reached US$14.8 billion up 54% on 2007’s US$9.7 billion.

Chinese and Russian companies played a central role in world M&A activity. Asia Pacific deals reached record highs with total value more than doubling to US$16.4 billion in 2008 from US$7.2 billion in 2007.

Deal activity slowed considerably in Western Europe with deal numbers down from 104 in 2007 to 65 in 2008.

IE