BGL Metals Insider: Aluminum Set to Surge (PDF 1415KB)

Metals and Metals Processing

The BGL Environmental Services Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank

serving middle market companies throughout the U.S. and internationally.

Spotlight On:Aluminum Page 9Aluminum is set to surge against a backdrop of improving

demand and as lightweighting trends favor substitution for steel.

Aluminum sheet, casting, and extrusion suppliers are ramping up

with investments in technology and manufacturing processes to

advance innovation and growth.

Insider

The BGL Metals Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank

serving middle market companies throughout the U.S. and internationally.

March 2014Brown Gibbons Lang & Company

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Environmental Services Insider

M&A Activity• Trends in the broader M&A market disappointed in 2013, with deal

volume declining roughly 16 percent year over year despite pent up

demand and abundant capital stores. The middle market1 saw modest

gains, with deal value increasing 8.5 percent on a 5.5 percent increase

in deal volume (Page 4). Overall private equity deal fl ow declined by

14 percent. Add-ons captured a greater share of transaction activity,

accounting for 53 percent of volume, surpassing buyout activity for the

fi rst time, according to PitchBook.

• Limited deal fl ow fueled a highly competitive market for quality

transactions, pressuring multiples. Aggressive lenders were

accommodating robust valuations with higher leverage in transaction

structures. Middle market1 senior leverage (senior debt to EBITDA)

increased to 4.6x in December, reported Standard & Poors Leveraged

Commentary & Data (S&P LCD), a record high since the 2007 peak. The

asset based lending market is seeing increased liquidity as new players

join the fray, with competition putting pressure on structure and pricing.

Interest rates are expected to remain low or increase slightly in 2014,

conducive to increased fi nancing activity.

• A seller’s market drove up valuation multiples to best previous records,

with fi nancial buyers in many cases bidding at comparable levels to

strategics. S&P LCD reported middle market1 EBITDA multiples of 9.2x

for strategic buyers and 8.1x for fi nancial buyers.

• Headline U.S. metals deals announced during the second half of 2013

included the acquisition of ThyssenKrupp Steel USA by an investor

consortium comprised of ArcelorMittal, Nippon Steel, and Sumitomo

Corporation. Sumitomo also picked up Edgen Group. Private equity

announced several new metals platforms, including TMS International

(The Pritzker Group), Precision Products Group (Long Point Capital;

Greyrock Capital Group), and Detroit Tool Metal Products (Wynnchurch

Capital).

• Middle market M&A activity is forecasted to increase in 2014, with a

sustained economic recovery, excess capital, and a supportive credit

market key determinants of deal fl ow. Buyers are expected to be more

discerning in their approach to acquisitions.

(1) Middle market defi ned as enterprise values between $25 million and $500 million.

2

For more information on how

BGL’s Global Metals Practice can assist

your company, please contact:

Delivering Results to the Global Middle Market

Scott T. Berlin Managing Director & PrincipalHead: Metals and Metals Processing216.920.6642

[email protected]

Industry Valuations• The public equity markets have exhibited signifi cant volatility as mixed

economic news in the U.S. and China and the Federal Reserve’s tapering

efforts test investor confi dence. Broad market indices retreated in January,

with the S&P 500 and DJIA down 2.7 percent and 4.5 percent, respectively,

during the month. Year-over-year, the S&P 500 and DJIA are up 23 percent

and 16 percent, regaining in recent weeks. With the exception of Fabricators,

which outperformed the broader market (up 35 percent year-over-year), the

BGL Metals composite indices have underperformed the market during the

same period.

*As of February 28, 2014.

Operating Highlights• Domestic steel prices remain under pressure with insiders forecasting HRC to

bottom at around $600/ton after reaching a peak of $680/ton in January.

• Year-to-date steel production through February* was 13.9 million tons, down

1.1 percent from the same period a year ago, at a capability utilization of 76.3

percent (down from 77.3 percent). January service center inventories were

reported at 8.6 million tons, a 2.1 percent decrease year-over-year. Monthly

shipments were 3.7 million tons, with months supply on hand decreasing to 2.3

from 2.8. *As of February 22, 2014.

• Companies are reporting positive performance in automotive, aerospace, and

energy end markets, with favorable demand drivers indicative of sustainable

long-term growth. A recovery in non-residential construction is expected to

gain traction in 2014.

• Downstream aluminum producers are poised for tremendous growth, with

“body-in-white” cited as the fastest growing specialty market. Companies

are investing in strategic growth and acquisitions to capitalize on growing

automotive demand.

• Shredder overcapacity and tight scrap availability expected to continue to

pressure margins for scrap processors.

3

4

Overall M&A ActivityMergers & AcquisitionsMetals Insider

Middle Market M&A Activity Private Equity Transaction Activity

Mergers & Acquisitions Activity

Trends in Valuation

Acquisition Financing Trends

Leverage Equity Contribution

SOURCE: Standard & Poors LCD.

SOURCE: Standard & Poors LCD.*NOTE: N/A Data not reported due to limited number of observations for period.*NOTE: N/A Data not reported due to limited number of observations for period. SOURCE: Standard & Poors LCD.

SOURCE: PitchBook.

SOURCE: Standard & Poors LCD.

Transactions with Strategic Buyers Transactions with Financial Buyers

Transaction Count by Deal Size

Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.

EBIT

DA

Mul

tiple

Num

ber o

f Tra

nsac

tions

SOURCE: S&P Capital IQ.Based on announced deals, where the primary location of the target is in the United States.Middle market enterprise values between $25 million and $500 million.

119

148

125

151

106

141

156

145

107

132

148

114

58 97 96 131

100

122

141

134

120 16

616

315

413

716

016

4 235

147

161

192

199

207 21

921

4 240

207 22

221

126

819

1 207 23

311

391

120

111

197

145 16

1 234

204

168

230

226

214

176 21

118

830

720

8 227 24

8 28665

6659

6362

67 6363

3658

4319

1926 35

4032

4258

6155

63 6853

4254 50

6939

4660

79$0

$10

$20

$30

$40

$50

$60

$70

0

100

200

300

400

500

600

700

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2006 2007 2008 2009 2010 2011 2012 2013

Transaction Value ($ in billions)

Num

ber

of T

rans

actio

ns

$25M-$50M $50M-$250M $250M-$500M Trans Value

-

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011 2012 2013

Under $25M $25M-$100M $100M-$500M

$500M-$1B $1B-$2.5B $2.5B+

8.2x

6.8x 7.

1x

9.8x

8.0x

7.6x

7.7x

8.6x8.7x

9.4x

8.4x

7.6x

9.2x 9.

5x

8.9x

10.0

x

9.1x

10.2

x

8.2x

9.5x 9.7x

9.7x

8.5x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013

<$250 mill ion $250-$499 million $500 mi llion +

7.2x

8.3x

6.5x 6.6x

6.3x

8.1x 8.

5x

8.2x

8.0x

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7.4x 7.

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8.7x

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5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013

<$250 mill ion $250-$499 million $500 mi llion +

EBIT

DA

Mul

tiple

NA* NA*NA*NA*NA*

3.6 4.0 3.1

2.6 3.2

3.9 3.9 4.6 4.6

1.2 1.5

1.0 1.0

0.8 0.4 0.6

0.1 0.1

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2006 2007 2008 2009 2010 2011 2012 2013 Jan-14

Sen ior Debt/EBITDA Sub D ebt/EBITDA

38%

35%

46%

51%

47%

43%41% 40% 40%

25%

30%

35%

40%

45%

50%

55%

2006 2007 2008 2009 2010 2011 2012 2013 Jan-14

SERVICE CENTERS

In November 2013, Reliance Steel & Aluminum Co.

(NYSE:RS), through its wholly-owned subsidiary American

Metals Corporation, acquired Haskins Steel Co., Inc.

Founded in 1955 and based in Spokane, Washington,

Haskins distributes primarily carbon steel and aluminum

products to a diverse customer base in the Pacifi c

Northwest. In-house processing capabilities include

shearing, sawing, burning, and forming. The company

generated net sales of approximately $31.5 million in 2012.

Commenting on the rationale for the acquisition, Reliance

CEO David Hannah said, “Haskins will enhance American

Metals’ penetration into this geographic area where it did

not previously have a physical presence.”

In November 2013, Sumitomo Corporation acquired

Edgen Group in a transaction valued at $806 million.

Baton Rouge, Louisiana-based Edgen is a global distributor

of specialty products to the energy and infrastructure

markets, including steel pipe, valves, quenched and

tempered and high yield plate, and related components

such as fi ttings, fl anges, and connectors. The company

employs 660 people in over 35 locations in 18 countries and

generated sales of approximately $1.8 billion in 2013. “The

investment in Edgen Group will represent further expansion

of Sumitomo’s distribution presence across the upstream,

midstream, and downstream oil and gas markets, and

other related energy and infrastructure segments and will

complement Sumitomo’s integrated supply solutions to the

growing energy market,” said Kazuhiro Takeuchi, President

and CEO, SCOA and SC General Manager for the Americas,

in a press release announcing the transaction. Transaction

Multiples: .5x Revenue and 8.4x EBITDA

INTEGRATED/MILLS

In November 2013, ArcelorMittal (ENXTAM:MT), Nippon

Steel and Sumitomo Corporation (TSE:5401) acquired

ThyssenKrupp Steel USA, LLC from ThyssenKrupp AG

(XTRA:TKA) in a 50/50 joint venture partnership for

$1.6 billion. The TK Steel processing facility is located in

Calvert, Alabama and has a total capacity of 5.3 million

tons including hot rolling, cold rolling, coating, and fi nishing

lines. The acquisition complements ArcelorMittal’s existing

U.S. auto business and strengthens its position in supplying

the energy industry.

In December 2013, Benjamin Steel Company, Inc. acquired

the structural steel division of Byer Steel Group Inc.,

renaming the business Frederick Steel. The acquisition will

strengthen Benjamin’s market position in Ohio and expand

its capabilities in carbon steel. Byer Steel will continue to

own and operate its rebar mill, rebar sales, and fabrication,

and scrap metal recycling divisions.

In December 2013, Willbanks Metals, Inc. acquired First

Process Steel, Inc. Based in Tulsa, Oklahoma, First

Process Steel provides plate cutting and forming services

to manufacturers and fabrication companies. With the

acquisition, Fort Worth, Texas-based Willbanks enters a

new geographic market and expands opportunities in oil

and gas equipment and heat exchanger manufacturing.

SCRAP

In December 2013, Thalheimer Brothers acquired

Baltimore-based Ansam Metals, a broker and processor of

cupro-nickels, monels, brass mill specialty items, and other

nonferrous metals. Philadelphia-based Thalheimer Brothers,

a non-ferrous scrap metal processor of brass, copper,

nickel alloy, and stainless steel, was acquired by Audax

Group through a recapitalization in December 2012. Wells

Fargo Capital Finance, Audax Senior Debt, and LBC Credit

Partners provided fi nancing to support the transaction.

In December 2013, Alter Trading Corporation announced

the acquisition of the assets of All Metals Recycling LLC,

an operator of a scrap metal recycling facility in Iowa. The

transaction follows on the October purchase of Columbus,

Nebraska-based metal recycler CMI-TMC Holdings Inc.

The acquisition added six facilities, including two Nebraska

shredders in Columbus and Kearney, and two auto parts

facilities, making Alter the largest metal recycling company

in Nebraska said Jay Robinovitz, Alter president and

chief operating offi cer, in a press release announcing the

transaction.

In December 2013, Keywell Metals, LLC was acquired by

Prophet Equity. Founded in 1924 and based in Chicago,

Illinois, Keywell is a supplier of recycled stainless steel, high-

temperature alloys, and titanium metals in North America.

The company also operates collection and processing

facilities in Pennsylvania, New York, North Carolina, and

Notable M&A Activity in Service Centers

5SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.

Metals M&A ActivityMergers & AcquisitionsMetals Insider

Notable M&A Activity in Scrap

6

Atlanta. The company fi led for Chapter 11 bankruptcy

protection in September 2013. The announced

transaction value was approximately $15.8 million.

In November 2013, Alliance Steel Service Company

acquired EOS Metals, Inc. from Jack Engle Co. Based

in Minneapolis, Minnesota, EOS Metals is a non-ferrous

scrap metal recycler that has operated in the upper

Midwest for more than 50 years. With the acquisition,

Alliance will diversify and strengthen its operations into

the nonferrous sector, said Alliance President Michael

Zweigbaum. Alliance received an undisclosed amount

of development capital from Spell Capital Partners in

November 2013.

In October 2013, United Milwaukee Scrap LLC

announced the merger with scrap recycler Schulz’s

Recycling, Inc., expanding geographic footprint as well

as broadening the availability of resources for both

company’s customers. Schulz is a provider of ferrous

and non-ferrous scrap processing and has two scrap

yards in Wisconsin. The newly merged company will

operate from eight locations across Wisconsin, with

additional offi ces in Minnesota and Massachusetts.

In October 2013, TMS International was acquired by The

Pritzker Group in a take-private transaction valued at

approximately $1 billion. TMS International is the largest

provider of outsourced industrial services to steel mills

in North America and internationally, including raw

materials procurement, scrap management, materials

management, and slag processing services. The

company provides mill services at 81 customer sites in 12

countries and operates 36 brokerage offi ces from which

it buys and sells raw materials across fi ve continents.

The transaction represents an exit for Onex Corporation,

which acquired the company from Wellspring Capital

Partners in 2007. The sale resulted in a 2x multiple of

capital invested and a 13 percent return, according to

PitchBook. Transaction Multiples: .4x Revenue and 6.1x

EBITDA

In July 2013, Metal Management Aerospace, Inc.,

a subsidiary of Sims Metal Management Limited

(ASX:SGM), was acquired by ELG Utica Alloys, Inc.

The business specializes in the recycling of titanium

alloys and high temperature metals for the aerospace

industry. The acquisition is expected to increase ELG’s

capabilities within nickel and titanium superalloy scrap

processing.

In July 2013, Metalico, Inc. (NYSE:MEA) acquired Segel

& Son, Inc., a Pennsylvania-based recycler and processor

of ferrous and non-ferrous metals. The company also

provides electronics recycling for computers and other

electronics as well as cardboard and mixed paper

recycling services. The acquisition is expected to enhance

subsidiary Goodman Services’ position along the southern

New York border and boost supply materials for Metalico’s

Buffalo shredder. Goodman Services, also based in

Pennsylvania, was acquired by Metalico in January 2011.

Brown Gibbons Lang & Company served as exclusive

fi nancial advisor to Goodman in the sale.

FABRICATORS

In February 2014, SRS International acquired Empire Die

Casting Co., a manufacturer of precision aluminum and

zinc die castings for the automotive and HVAC industries.

Applications include engine covers, pump housings, and

motor counter-weights. Empire is based in Macedonia,

Ohio and was founded in 1948. Comvest Partners provided

a $11.6 million fi rst-lien loan to fund the acquisition.

In January 2014, Associated Steel Group, a portfolio

company of Promus Equity Partners, completed the

add-on acquisition of Alliance Steel, Inc. Oklahoma-

based Alliance is a fully integrated manufacturer of metal

building systems and structural steel and components

focused primarily on serving non-residential customers in

Oklahoma, Texas, and other surrounding states. Promus

formed Associated Steel in partnership with Jon Vesely,

an independent sponsor, as a platform for acquiring

companies in the metal building industry. ACI Building

Systems LLC, acquired in August 2012, was the fi rst

acquisition for the platform. ACI manufactures metal

building and roofi ng systems. Expansion continued with

the acquisition of Georgia-based AIM Metals, LLC in

February 2013.

In December 2013, Precision Castparts Corp. (NYSE:PCP)

completed the acquisition of Compton, California-based

Alloy Processing, Inc., a provider of metal fi nishing and

non-destructive services for commercial aircraft including

chemical processing and various cleaning techniques,

inspections, specialized testing, and specialized painting/

SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.


Notable M&A Activity in Fabricators

7

coating. Also in December, PCP acquired Gardena,

California-based SOS Metals Inc., a recycler of metals

including titanium, aluminum, and high-temperature alloys

at plants in the United States, UK, Brazil, and Asia.

In December 2013, O2 Investment Partners acquired

Alpha Sintered Metals (ASM) in partnership with

management. Based in Ridgway, Pennsylvania,

ASM manufactures high-precision powdered metal

components and assemblies which are used in small

engines, transmissions, and mechanical drive applications.

Industries served include the automotive, recreational

vehicle, lawn and garden, commercial vehicle, and

agricultural equipment markets. The company employs

189 people. The transaction represents an exit for Cyprium

Partners (fka Key Principal Partners) and Lynwood

Capital Partners, which acquired the company in 2004.

In December 2013, Pilot Electronics Corporation

(TSEC:4916) announced it was acquiring Elite

Manufacturing Technologies, Inc., a contract

manufacturer that provides precision sheet metal

fabricated components.

In November 2013, Liberty Hall Capital Partners

and Hamilton Lane acquired Precise Machining &

Manufacturing, a manufacturer of precision machined

parts for the aerospace, defense, commercial, and medical

industries. The company was founded in 1974 and is

based in Tulsa, Oklahoma. Bank of America Merrill Lynch

provided funding for the acquisition. Precise is the fi rst

acquisition for Accurus Aerospace Corporation, a growth

platform created to serve the Tier 1 aerospace market.

In November 2013, U.S. Galvanizing, L.L.C., a subsidiary

of Trinity Industries, Inc. (NYSE: TRN), acquired the San

Antonio galvanizing facility from Southwest Galvanizing,

Inc. The facility employs 60 people and focuses on

providing hot-dip galvanizing services. Based in Houston,

Texas, Southwest Galvanizing provides full-service hot-dip

galvanizing as well as metalizing and sandblasting services

to its industrial clients.

In November 2013, Revolution Capital Group, LLC

acquired Maysteel LLC from Everett Smith Group,

Ltd. Founded in 1936 and headquartered in Allentown,

Wisconsin, Maysteel designs and manufactures custom

precision sheet metal enclosures, electrical cabinets, and



metal fabricated assemblies for diverse industries including

utility, alternative energies, medical, and security, among

others.

In November 2013, Gladstone Investment Corporation

(NasdaqGS:GAIN) and Gladstone Capital Corporation

(NasdaqGS:GLAD) acquired Alloy Die Casting Company

from Sanders Industries, Inc. Alloy Die Casting is a

producer of precision engineered aluminum and zinc

castings for aerospace, defense, aftermarket automotive,

and industrial applications. The company was founded

in 1946 and employs approximately 350 people. The

announced transaction value was approximately $23.3

million. Gladstone Capital Corp. provided $7 million in

debt and equity fi nancing and Gladstone Investment Corp.

provided $16.3 million in debt and equity to support the

acquisition.

In October 2013, Mueller Copper Tube Products, a

subsidiary of Mueller Industries, Inc. (NYSE:MLI) acquired

Howell Metal Company from Commercial Metals

Company (NYSE:CMC). Based in New Market, Virginia,

Howell manufactures copper tubing for plumbing, HVAC,

and refrigeration applications. The announced transaction

value was approximately $58.5 million.

In October 2013, Trive Capital acquired Coast Plating,

Inc. Founded in 1965 and based in Gardena, California,

Coast Plating provides metal processing and fi nishing

services, including non-destructive testing, titanium

cleaning, chemical conversion, and cleaning and applying

anodized fi nishes, as well as paint coatings to alloys of

aluminum, titanium, and stainless steel. The company

serves aerospace customers located in the U.S. and

internationally. Fifth Third Bank provided debt fi nancing in

support of the transaction. The transaction represents an

exit for Gemini Investors, MJG Investments, and Saratoga

Investment Corp., which acquired the company in March

2007. Coast Plating later added-on with the acquisitions of

Coastline Metal Finishing in October 2013 and Chrome Plus

International in December 2013.

In September 2013, Taggart Enterprises, Inc. was acquired

by Power Partners, Inc. Charlotte, North Carolina-based

Taggart (fka Carolina Tool & Die Corporation) is a provider

of metal fabrication and stamping services, including

laser cutting, CNC stamping, metal forming, press brake

forming, welding, progressive and secondary stamping,

Notable M&A Activity in Fabricators

8

tool and die support, deep draw and short run stamping,

and assembly services

In August 2013, Shiloh Industries (Nasdaq:SHLO)

acquired Contech Castings LLC, a provider of high-

pressure aluminum die cast parts for the automotive

industry, expanding Shiloh’s existing high-pressure,

high-vacuum casting capabilities with the addition of

squeeze casting, vacuum casting, and high-pressure

conventional die casting. The move is in line with

Shiloh’s efforts to expand its offering of lightweighting

solutions. The cash purchase price paid was $54.4

million.

In July 2013, Sheffi eld Manufacturing, a provider

of precision machining, sheet metal, and welding

products, was acquired by Hancock Park Associates

and Next Point Capital. Based in Sun Valley, California,

Sheffi eld serves OEMs and their direct suppliers with

products made from aluminum, stainless steel, titanium,

magnesium, copper, phenolic, nylon, brass, and inconel

materials along with a range of other industry-specifi c

services. The company counts Boeing, Lockheed Martin,

Raytheon, and Northrop Grumman as customers, and

serves both commercial and military clients. First Capital

provided $9 million of asset based lending facility in

support of the transaction.

In July 2013, Precision Engineered Technologies, LLC,

the precision machining platform of private equity

investor Joshua Partners, acquired Imperial Machine &

Tool Co Inc. Wadsworth, Ohio-based Imperial produces

precision boring and machining components for

customers in the hydraulic fracturing segment of the oil

& gas and steel industries. Machining services include

turning, milling, and boring of rough steel into fi nished

parts.

In June 2013, Detroit Tool Metal Products (DTMP)

was acquired by Wynnchurch Capital in partnership

with management. The acquisition represents the fi rst

in a series of planned investments to build one of the

largest Tier 1 metal fabrication businesses in North

America, according to a press release announcing the

transaction. Founded in 1947, Lebanon, Missouri-based

DTMP is a manufacturer of precision metal stampings,

fabricated components, and value-added assemblies for

the heavy truck, construction, industrial, and agricultural

markets. Wynnchurch is backing DTMP’s management

team led by CEO Terry Wogan. Wynnchurch and Wogan

intend to leverage the team’s operating track record to

make strategic acquisitions and build a unique fabrication

platform the likes of which does not currently exist in

a space dominated by smaller operators. Senior debt

fi nancing for the transaction was provided by Bank of the

West. Bank of Montreal provided mezzanine fi nancing and

an equity co-investment. Exiting their 2001 investment is

an investor consortium comprised of Capital For Business,

Diamond State Ventures, InvestAmerica Venture Group,

Kansas City Equity Partners, Kansas Venture Capital,

MidStates Capital, MorAmerica Capital, and North

Dakota Small Business Investment. The business was a

former subsidiary of DT Industries. Brown Gibbons Lang &

Company served as exclusive fi nancial advisor to

DT Industries in the divestiture.

In June 2013, Long Point Capital acquired Precision

Products Group (PPG), a manufacturer of small diameter

spiral-wound tubes and cores for the automotive,

electrical insulation, medical and pharmaceutical, and

specialty packaging industries. Based in College Park,

Maryland, PPG employs approximately 300 people from

facilities in the United States and China. Greyrock Capital

Group provided $8 million of subordinated debt and

equity to support Long Point Capital’s acquisition of the

company. PPG was a former portfolio company of La Salle

Capital Group, which it acquired in 1993.



Metals Insider

Spotlight On: Aluminum

9

Metal of the future?

Aluminum is set to surge against a backdrop of improving

demand and as lightweighting trends favor substitution

for steel. Aluminum demand has grown 30 percent since

2009, led by the transportation and building industries,

reported the U.S. Aluminum Association in its 2013 annual

report, stressing that the market wants more extruded

aluminium products and solutions.

Automotive

Automotive build rates are at historic highs with U.S.

vehicle sales surpassing 15 million in 2013 and on pace to

reach a forecasted 17 million in 2015.1 Automakers came

out of the recent downturn with a renewed focus on

innovation, commented Alcoa CEO Klaus Kleinfeld in a

recent presentation to the Yale School of Management,

with the automotive industry now at an infl ection point,

driven by changes in regulation and consumer preference.2

• U.S. corporate average fuel economy (CAFE)

standards will require the average car or light-duty

truck to get 54.5 miles per gallon by 2025, up from

27.2 in 2011 and 35.5 targeted for 2016. Mass reduction

will be critical to meeting these standards, says Ducker

Worldwide, a market research fi rm and advisor to

aluminum and steel producers, which it estimates will

require eliminating 400 pounds, or roughly 10 percent

of average vehicle weight.3

• Changes in consumer demand are leading to

improvements. Kleinfeld speaks to observing a sea

change in consumer preference over the last ten years,

“Today we see more than 80 percent of consumers are

willing to pay up for a more fuel effi cient car. And they

are doing it not to go down in their segment.”2 Ducker

Worldwide cites similar fi ndings, reporting 83 percent

of consumers willing to pay for more fuel effi ciency in

2011, up from 54 percent in 2008.3

In an effort to build more fuel-effi cient vehicles,

automakers are incorporating lightweight materials to

replace steel without sacrifi cing safety, durability, or

comfort. Aluminum is expected to see the largest gains

over competing materials such as advanced high strength

steels and carbon fi ber.

Aluminum Manufacturing in the U.S.

Source: Aluminum Manufacturing in the U.S., November 2013, IBISWorld.

U.S. Aluminum Market Growth: 2007 - 2018E

World Price of Aluminum

Strong downstream growth is forecasted, led by automotive, with demand for greener cars and rising domestic demand expected to spur increased aluminum manufacturing in the U.S.

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

$0

$10

$20

$30

$40

$50

Growth Rate (%

)

Reve

nue

($ b

illio

n)

1400

1800

2200

2600

3000

$ pe

r ton

“Aluminum lightweighting is the enabler of future sustainable cars.”

European Aluminum Association

Metals Insider

10

Automakers are increasingly turning to aluminum for

its valuable properties: high strength, light weight (one-

third the density of steel), corrosion resistance, energy

effi ciency, and recyclability (increasing in importance

with rising energy prices), to name a few. Aluminum has

been proven to withstand harsh environments, with the

aerospace and military industries large consumers of the

metal.

On the roadAudi is one of the pioneers in the use of aluminum in

vehicle construction. Its 1994 A8 model was the world’s

fi rst large-volume production car with a self-supporting

aluminum body, and the technology has been applied to

the R8 and TT compact sports cars.4

Newer examples include Tesla’s all-aluminium Model S

electric performance sedan, and Mercedes, which was able

to shed 300 pounds from its SL model by using aluminum.

In 2013, the Land Rover Range Rover became the world’s

fi rst SUV with an all-aluminum unibody structure that is

39 percent lighter than the outgoing steel body enabling

total vehicle weight savings of 926 pounds.

Ford’s aluminum-bodied 2015 F-150 pickup truck, unveiled

in January 2014, is being heralded as a game-changer

across the industry. The F-150 has been the automaker’s

best-selling model for over 30 years and accounts for

35 percent of Ford’s North American revenue according

to IHS Automotive5—a bet that underscores the long-

term trend that aluminum is gaining “share of car.” The

F-150 sheds some 700 pounds with the use of military-

grade aluminum, which is expected to increase total

aluminum demand by at least 500 million pounds annually,

according to industry analysts.6 The F-150 is reportedly

a fi rst step in a broader strategy to shift all of its full-

size truck bodies including its Expedition and Navigator

S.U.V.’s to primarily aluminum construction over the next

three years.5 “I think we will see more and more aluminum

across the entire product line,” Ford CEO Alan Mulally told

WardsAuto during the North American International Auto

Show.7

“Ford is stepping out ahead of the other truck makers

with the aluminum strategy,” observed Richard Schultz of

Ducker Worldwide.5 “As the largest vehicle platform in the

Americas, this will educate designers, engineers, and the

general public that aluminum is playing a major role in the

automotive sector,” says Patrick Lawlor, head of Sapa’s

organization in the Americas.8 “Ford’s introduction of the

2015 F-150 pickup truck was a game changer, and it’s the

fi rst, not the last, conversion of this type,” said Charles

Belbin, director of communications at Novelis.9

Aluminum had largely been limited to luxury vehicles

because of its high cost relative to steel. Insiders say

the F-150 is making the transition to the mass market.

“We’re about to see aluminum make that step into mass

market vehicles,” said Alcoa marketing director Randall

Scheps. “We can certainly say that every year is going

to be big for aluminum for the foreseeable future.”10

“The real revolutionary change that is happening is that

Aluminum Manufacturing in the U.S.

Process End Market Competitive Landscape

2013 Revenue: $36.7 billion

42%

23%

17%

13%

3% 3%Aluminum sheet, plateand foil

Secondary aluminum

Aluminum extrusions

Primary aluminum

Alumina

Other aluminum products

20%

7%

4%

4%

2%1%

63%

Company A

Company B

Company C

Company D

Company E

Company F

Other

Fragmented marketTransportation market largest consumer

34%

24%

14%

11%

7%

7%4%

Transporta�onequipmentPackaging

Construc�on

Consumer durables

Electrical

Machinery

Other

Source: Aluminum Manufacturing in the U.S., November 2013, IBISWorld.

Metals Insider


11

aluminum is now moving into the high volume cars. What

we are seeing now is a broad-based transformation from

steel to aluminum,” echoed Alcoa’s Klaus Kleinfeld, in a

presentation to the Yale School of Management. “2014

marks the beginning of dramatic growth for aluminum in

the auto sector.”2

General Motors is gearing up to launch a largely aluminum-

bodied pickup truck by late 2018, announcing it has

secured supply contracts with Alcoa and Novelis. The

move to an “aluminum intensive” large pickup marks an

apparent change of direction for GM, which has pursued

smaller and lighter weight steel-bodied trucks.9 Novelis

North America president Marco Palmieri told American

Metal Market (AMM), “We anticipate more automakers,

domestic and international, to make announcements

regularly in the following years that will transform the

automotive industry.”11

A large-scale shift to aluminum will not come without its

challenges, requiring a retooling of manufacturing facilities.

Speaking to the launch of the F-150, Raj Nair, Ford’s group

vice president for product development, told AMM, “It’s a

changeover to our manufacturing facilities, our stamping

plants and body construction facilities, and assembly

plants. But we’ve got a lot of experience in aluminum

already.” Nair added, “We’re spending over $1 billion at the

Kansas City plant (in Missouri) for the Ford Transit and the

F-150.”11

A switch to aluminum among U.S. carmakers could add

as much as 40 percent to North American demand in

coming years, said Kenneth Hoffman, head of research

for metals and mining at Bloomberg Industries.4

“Tightening fuel economy regulations continue to drive

the growth of aluminum usage,” offered Charlie Durant,

a senior consultant at metals analysis company CRU,

in a Bloomberg interview, adding, “The transportation

sector will be the fastest-growing end-use segment for

aluminum demand due to higher automotive build rates in

developing nations and increasing intensities of use in the

developed world.”4

Automotive growth is fueling a bullish long-term demand

outlook for aluminum which is expected to lift prices.

Transportation accounts for some 26 percent of global

aluminum demand, with cars and trucks using two-thirds,

or about 10 million metric tons a year, according to

International Aluminum Institute estimates. Morgan Stanley

forecasts a 29 percent gain in aluminum prices by 2018.4

Aluminum use acceleratingThe automotive industry is consuming larger quantities of

aluminum. In North America today, an estimated

85 percent of aluminum content in vehicles is found in four

components—engines, transmissions and other driveline,

wheels, and heat exchangers—reports Ducker Worldwide.

The largest remaining opportunity is in closure panels and

body-in-white (BiW) applications—hoods, doors, roofs,

wings, and trunk lids. Ducker estimates that by 2017,

over 20 percent of aluminum content will be found in

body, bumper, and closure components.3 The conversion

of automotive body to aluminum (BiW) will be a game

changer for downstream aluminum use, reports Goldman

Sachs, with a growth rate higher than any other end

market for specialty metals for the rest of this decade.12

Signifi cant growth is projected for the automotive

aluminum sheet market. Industry sources, including

consultant agencies on environmental regulations, forecast

aluminum auto sheet to grow at a 14 percent CAGR from

2012 to 2025.12 Automotive demand for aluminum sheet

is forecasted to increase fourfold by 2015 and 10 times

by 2025, according to Alcoa’s Randall Scheps. “We’ve

got a projection that the North American auto industry

will become the largest consumer of aluminum sheet in

the next fi ve years, surpassing Europe,” Scheps said in an

interview with WardsAuto. Scheps forecasts vehicles with

a full body-in-white many contain up to 1,000 pounds of

aluminum, including wheels, engines, and transmission

cases.13

Industry analysts are forecasting aluminum extrusion

content to grow but at a slower rate, at a 5 percent CAGR

over the same period.12 New applications for castings are

expected.

Metals Insider

12

Aluminum value chain evolvingFacing headwinds of commodity price volatility,

oversupply, and a global economic slowdown (China key

to demand growth), integrated producers are looking at

diversifi cation and expanding downstream into higher-

margin, value-added fabrication of aluminum products.14

Value-added businesses account for 57 percent of

revenues and 80 percent of segment profi ts at Alcoa,

according to the company’s Q4 ’13 earnings call in

January 2014. The aluminum producer reported record

downstream results in the fourth quarter. “What you’re

seeing refl ected in the earnings is that we are building

up our value-add businesses,” Kleinfeld told CNBC. “We

are growing it…and that’s what we’re going after.”14

“Alcoa’s generated the vast majority of its operating

income from its global rolled products and its engineered

products and services segments,” said Morningstar equity

research analyst Andrew Lane, who expects downstream

businesses to generate $1.0 billion in revenue growth for

the company through 2016.14

Growing automotive demand is creating a ripple effect for

downstream fabrication, tooling, and recycling. Aluminum

sheet, casting, and extrusion suppliers are ramping up

rapidly, reported the Aluminum Association in the 2013

Global Automotive Lightweight Materials Conference.

Recent announced capacity additions suggest an outlook

of robust growth:

Novelis will have invested nearly $550 million to expand

its global automotive capacity in the last two years.

The company announced in December 2013 that it was

building new fi nishing lines at plants in Oswego, New

York and Nachterstedt, Germany at a cost of $205 million.

The two new lines are dedicated to the production of

aluminum automotive sheet and will each have a capacity

of 120,000 metric tons per year, bringing aluminum

capacity to 900,000 tons annually when complete in

2015. Novelis is investing $100 million on its fi rst aluminum

manufacturing plant in China. The facility will produce

aluminum sheet for the automotive sector and will have

a capacity of 120,000 metric tons per year. Construction

began in November 2012 with startup planned for late

2014.15

Aluminum Use is Accelerating

Source: Ducker Worldwide, Aluminum Associa�on Transporta�on Group, Goldman Sachs.

Aluminum pounds per U.S. Light Vehicle

Current North American Aluminum Content

Automotive aluminum content is expected to increase ~60 percent by 2025 driven by regulatory mandates to save weight, reduce emissions, and increase fuel economy.

Aluminum content per vehicle in North America increased from 200 pounds in 1995 to 350 pounds in 2012, driven by castings: parts for engines, transmissions, chasses, and suspension systems.

Manufacturers are now focusing on rolled and extruded parts where aluminum currently has low penetration. It is estimated that 85 percent of aluminum added from 2012 to 2025 is likely

to be wrought products.

0% 20% 40% 60% 80% 100%

Body-in-White

Closures

Suspension arms/links

Bumper beams

Steering knuckles

Hoods

Road wheels

Cylinder blocks

Cylinder heads

Radiators & Transmission

1996

2012

Future North American Aluminum Content

*Non-Heat Treatable Sheet, Heat-Treatable Sheet

+ Over 90 lbs

+ Over 50 lbs

+ Over 20 lbs

+ Over 5 lbs

5 9 14 4

97

60

38

100

25

50

75

100

NHT Sheet HT Sheet Extruded Shapes Forgings

Poun

ds p

er ve

hicl

e

2012 2015 2025

9% of material distribution

16% of material distribution

343

550

0

100

200

300

400

500

600

2012 2025EPo

unds

per

Veh

icle

Metals Insider


13

Novelis expects global automotive demand for aluminum

sheet to grow by more than 30 percent per year through

the end of the decade. The company is forecasting

automotive to grow from 6 percent of its portfolio in 2013

to 25 percent by 2020.15

Alcoa is investing $575 million to expand production at

plants in Davenport, Iowa, and Alcoa, Tennessee to meet

demand from the auto industry. In addition, the company is

building a rolling mill at its greenfi eld joint venture project

in Saudi Arabia with the capacity to produce aluminum

automotive sheet.2

Technological advancements have made increased use

of aluminum possible. Alcoa is benefi ting from licensing

technology that is key to the use of aluminum in the

automotive industry, said CEO Klaus Kleinfeld. The

company’s patented Alcoa 951 aluminum pretreatment

process enables more durable bonding of aluminum

components in vehicles, can reduce spot weld points,

and results in lower manufacturing costs and is the new

standard for aluminum sheet, extrusion, and casting

suppliers across the automotive industry, according to a

company press release.16

Constellium and UACJ Corporation, through Tri-Arrows

Aluminum (UACJ’s subsidiary with Sumitomo Corporation

and Itochu Group), announced plans in January 2014

to create U.S. joint venture to produce body-in-white

aluminum sheet to serve the North American automotive

market. The planned facility will have an initial target

capacity of 100,000 metric tons and will be designed to

allow for future expansion. The total joint investment by

both parties is expected to amount to approximately

$150 million. “Automakers in the United States have

already started to convert key models from steel to

aluminum which we believe should translate into a

signifi cant increase in demand,” commented Laurent Musy,

President of Constellium’s Packaging and Automotive

Rolled Products business unit, in a company press release.

“We estimate that the U.S. market for body-in-white

aluminum rolled products could grow from less than

100,000 tons in 2012 to approximately 1 million tons in

2020.”17

The company is investing up to EUR 200 million over the

next three years to further grow its European body-in-

white (BiW) business.

Automotive componentsDie casting is an area seeing unprecedented demand from

automotive manufacturers, reports American Metal Market

(AMM), echoing the sentiment of industry participants

attending the North Aluminum Die Casting Association

Executive Conference. “We are seeing automotive

companies explore new castings in everything from

interior consoles to navigation units to larger components

in engines,” offered an industry executive in an AMM

interview. The executive added that most industry

insiders believe that federal fuel effi ciency standards will

continue to spur growth for the die casting industry, both

domestically and internationally.18

Shiloh Industries is making strategic investments in

support of its focus to be the automotive industry’s single

source supplier of casting, laser welding, and stamping

solutions for lightweighting challenges. One is the strategic

acquisition of Contech Castings, completed in August

2013, a provider of high-pressure aluminum die cast parts

for the automotive industry. With the acquisition, Shiloh

added squeeze casting, vacuum casting, and high-pressure

conventional die casting to its capabilities. Commenting on

the transaction, Shiloh CEO Ramzi Hermiz said in a press

release, “One of the necessary advancements for removing

weight from vehicles is going to come through increased

optimization of aluminum components, which is driving

demand for high-pressure, high-vacuum casting and

structural squeeze cast components.”19

Shiloh’s new corporate tagline “Lightweighting without

compromise” underscores its commitment. The company

announced in February 2014 that its subsidiary Shiloh Die

Cast Midwest is investing $8 million to expand its two Indiana

facilities to support new increased demand from automakers

for advanced lightweighting technologies. “Lighter body-in-

white and chassis components will signifi cantly contribute to

gross vehicle weight reduction, which is why we’ve focused

our growth efforts on new technologies that offer multiple

mixed material options for manufacturers,” Hermiz said.19

Metals Insider

14

Private equity is investing in metal platforms in

anticipation of automotive industry growth, eyeing

aluminum as an area of opportunity:

Platinum Equity announced the launch of Chassix in

April 2013, which it formed following the purchase and

integration of Diversifi ed Machine, Inc. (December 2011)

and SMW Automotive, LLC (January 2012) to create

a $1.2 billion global automotive supplier. The private

equity sponsor is calling the platform the automotive

industry’s largest single integrated resource for precision

chassis casting and machining solutions. “There is a huge

demand for high quality, advanced casting and machining

suppliers, particularly those that are skilled in casting

traditional ductile iron as well as those able to meet the

growing demand for precisely machined lightweight

aluminum components,” said Robert Remenar, CEO of

Chassix, in a company press release.

American Securities acquired Metaldyne in December

2012, a global manufacturer of highly-engineered metal-

based components for light vehicle engine, transmission,

and driveline applications with revenue in excess of

$1 billion. Metalworking capabilities include cold forging,

warm forging, powder metal, and aluminum die casting.

Speaking to Metaldyne’s growth, CEO Thomas Amato

explained, “We focused our product line to support

some of the most fuel-effi cient automotive engines and

transmissions in the market,” said Amato in a company

statement. “The trends towards more sophisticated

powertrains require a need for high performance metal-

based and noise-vibration-harshness solutions, which is

where Metaldyne comes in.”

ToolingThe North American auto industry is supported by some

750 tool and die suppliers, which produced tooling

worth $9.3 billion in 2012. According to a recent study

by Harbour Results, new vehicle launches will require an

estimated $15.2 billion in tooling demands—a fi gure the

fi rm calls conservative.20

Fundamental shifts in the automotive industry have led to

an opportunity for aluminum to replace steel as the tooling

material of choice. Aluminum can address constrained

capacity in the North American mold-making industry and

provide a number of advantages:

• Shorter tool lead times. Aluminum mold materials can

be machined up to 10 times faster than steel mold

materials, providing the ability to produce more molds

in the same timeframe.

• Quicker cycle times. Aluminum can offer cycle time

savings from 20 to 40 percent when compared with

steel.

• Lower costs. Aluminum’s greater thermal conductivity

enables processors to utilize smaller presses with

lower operating costs, realize energy savings, and

lower part rejection rates.

Honda today has over 100 aluminum molds in production.

General Motors has stated that one-third of its production

molds could be made of aluminum. Tremendous

publicity of the Ford F-150 will generate more interest in

aluminum’s use in automotive.

RecyclingAluminum is sustainable. Compared to aluminum primary

production, recycling of aluminum products needs as little

as 5 percent of the energy and emits only 5 percent of the

greenhouse gases. “Approximately 75 percent of all of the

aluminum is still in productive use, having been through

countless loops of its lifecycle,” says Ken Martchek, Energy

and Environment Chairman at the International Aluminum

Institute.

Closed loop recycling is essential in the sustainability of

transport aluminum, adds Martchek, who estimates that

90 percent of aluminum used in automobiles is collected

and recycled at the end of its useful life. Increasing

aluminum content in vehicles means volume gains for

recyclers, which will require changes to processing

methods.

Novelis is increasing scrap content in its products.

Average recycled content has increased from 33 percent

in 2010 to 43 percent in 2013. The company has set targets

to reach 50 percent by 2015 and 80 percent by 2020.15

Fifty percent of Sapa’s production is based on recycled

aluminum.21

In June 2013, Alcoa announced it was partnering with

Boeing to form a closed-loop program to signifi cantly

increase the recycling of internal aluminum aerospace

alloys used during the production of Boeing airplanes.2

Metals Insider


15

Aerospace benefi ting from lightweighting trends Aerospace is seeing strong growth, driven by

lightweighting trends and continued growth in commercial

aircraft build rates, which are expected to remain at

historical highs:

• Large commercial build rates have grown at an

8.1 percent CAGR since 200812

• Wide-body build rates expected to outpace narrow-

body build rates (8.9 percent CAGR versus 2.0 percent

between 2013 and 2016). Larger aircraft require more

materials, a positive for aerospace materials

producers.12

In January 2013, Dynamic Precision Group (DPG),

backed by The Carlyle Group and AeroEquity, acquired

Paradigm Precision Holdings. Paradigm specializes in

the manufacturing of complex, high-tolerance machined

and fabricated metal components for gas turbine engines

serving the commercial aerospace, defense, and energy

end markets. RBS Citizens and SunTrust Robinson

Humphrey provided fi nancing to support the purchase.

In September 2013, DPG acquired eight aerospace

component fabrication and machining facilities from a

subsidiary of GE Aviation. Acquisition fi nancing was led

by RBC Capital Markets and Deutsche Bank. The Carlyle

Group formed DPG in December 2011 to build a platform

of independent manufacturers of critical components for

commercial and military aircraft engines and industrial gas

turbines.

In January 2013, PRV Aerospace, a portfolio company

of Court Square Capital Partners, acquired Astro Spar, a

manufacturer of large, fl ight-critical, structural components

for the commercial aerospace industry. The company’s

products are manufactured using aluminum alloys and

include spars, door beams, stringers, webs, chords,

longerons, chines, wing formers, and seat tracks. Debt

fi nancing for the transaction was provided by GE Antares

Capital and Ares Capital Corporation. Court Square

acquired PRV Aerospace in May 2012.

In December 2012, Consolidated Precision Products

received $39.2 million in development capital from

American Capital and Audax Group. CPP manufactures

engineered components and sub-assemblies, function-

critical steel, aluminum, magnesium and super-alloy

castings for the commercial aerospace, military, and

industrial sectors. CPP is a portfolio company of Warburg

Pincus, which it acquired through a recapitalization in

October 2011.

Precision Castparts Corp. (PCC) acquired Klune Industries

in July 2012, a manufacturer of complex aluminum, nickel,

titanium, and steel aerostructures, focusing on complex

forming, machining, and assembly of aerostructure parts,

in addition to cold-formed sheet metal components. PCC

acquired Centra Industries in May 2012, a manufacturer of

a range of machined airframe components and assemblies

in both aluminum and hard metals.

Aluminum in green buildingsAluminum is adding value in green building solutions.

Extruded aluminum profi les are used in curtain walling,

windows, doors, facades, glazed roofs, and solar shading.

Intelligent façades incorporating aluminum systems

can decrease energy consumption in buildings by up

to 50 percent, according to the International Aluminum

Institute. Aluminum is advancing the use of solar energy by

integrating photovoltaic generation into facades.

Aleris International announced in February 2014 it is

acquiring Nichols Aluminum from Quanex Building

Products Corporation in a $110 million all-cash transaction.

Nichols is a leading producer of aluminum sheet for the

transportation, building and construction, machinery and

equipment, consumer durables, and electrical industries in

North America.

Looking ahead, aluminum suppliers will be looking to invest

in technology and manufacturing processes to advance

innovation and meet growing demand. The fragmented,

competitive landscape is evolving, with increased

consolidation likely as participants seek partnerships

to build scale and accelerate technology and capability

expansion.

Metals Insider

16

acquired by

The recycling operations of

acquired by

Ferguson Metals, Inc.

acquired by

and its affiliate

Aerospace InternationalMaterials-OEM, LLC

acquired by

acquired by

The melting operations of

Transaction experience across the aluminum value chain

Pending Sale

National provider of industrial

scrap recycling services

Representative Transactions

Pending Sale

Aluminumplate and

sheetdistributor

Pending Sale

Weldedaluminum

tubemanufacturer

Closed: January 2014

Aluminum extrusion manufacturer serving the construction and transportation markets

Metals Insider


17

Resources

1 Metals & Mining Industry Research Update, January 2014, GE

Capital.2 Alcoa website, www.alcoa.com. 3 Trends in Automotive – Aluminum, July 2013, Aluminum

Association Transportation Group.4 Yuliya Fedorinova and Marina Sysoyeva, Carmakers Use

Aluminum Over Steel, February 6, 2013, Bloomberg).5 Lindsay Brooke, The F-150’s Aluminum Diet, January 10, 2014,

The New York Times.6 Michael Cowden, Ford seen boon for aluminum demand,

January 23, 2014, American Metal Market.7 Byron Pope, Ford to Spread Aluminum Use Beyond F-150,

January 13, 2014, WardsAuto.8 U.S. wants more aluminum solutions, February 21, 2014,

www.sapagroup.com.9 Jeff Bennett, Mike Ramsey, and John W. Miller, GM Secures

Aluminum for Trucks, Auto Maker Steps Up Effort to Use Metal in

High-Volume Pickups, February 18, 2014, The Wall Street Journal.10 Len Boselovic, Alcoa looks to expand use of aluminum sheet in

cars, December 20, 2013, Pittsburgh Post-Gazette).

11 Nathan Laliberte, GM plans to increase use of aluminum in

pickups, February 19, 2014, American Metal Market.12 Growing demand from aerospace and automotive,

February 11, 2014, Goldman Sachs.13 Herb Shuldiner, Aluminum Suppliers Forecast Record Growth in

Vehicle Applications, June 18, 2012, WardsAuto.14 Morgan Brennan, What the F-150 tells us about the aluminum

industry, January 15, 2014, CNBC.15 Novelis website, www.novelis.com. 16 Alcoa’s Breakthrough Automotive Bonding Technology Named

Aluminum Industry’s Best, September 23, 2013, Alcoa website,

www.alcoa.com.17 Constellium website, www.constellium.com18 Nathan Laliberte, Die casters see strong start continuing,

February 25, 2014, American Metal Market.19 Shiloh Industries website, www.shiloh.com. 20 Rhoda Miel, Tooling study: Capacity won’t support projected

auto launch demand, November 5, 2013, Plastics News.21 sapa Sustainability Report 2012.

Metals Insider

Industry Valuations

Relative Valuation Trends

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

EV/EBITDA 5.2x 7.6x 20.1x 12.2x 23.9x 10.5x 11.5x 15.8x 9.8x 6.5x 7.4x 7.9x 7.7x 8.3x 8.6x 9.7x 9.9x 11.3x 12.4xEV/Revenue 0.3x 0.4x 0.5x 0.6x 0.5x 0.6x 0.6x 0.6x 0.5x 0.4x 0.5x 0.6x 0.5x 0.5x 0.6x 0.6x 0.6x 0.6x 0.6x

0.0x

0.1x

0.2x

0.3x

0.4x

0.5x

0.6x

0.7x

0.8x

0.9x

1.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

22.0x

24.0x

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413


0.2x

0.4x

0.5x

0.7x

0.8x

1.0x

1.1x

1.3x

1.4x

1.6x

1.7x

2.0x

6.0x

10.0x

14.0x

18.0x

22.0x

26.0x

30.0x

34.0x

38.0x

42.0x

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413


0.0x

0.3x

0.5x

0.8x

1.0x

1.3x

1.5x

1.8x

2.0x

2.3x

2.5x

3.0x

6.0x

9.0x

12.0x

15.0x

18.0x

21.0x

24.0x

27.0x

30.0x

33.0x

36.0x

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413


0.0x

0.1x

0.2x

0.3x

0.4x

0.5x

0.6x

0.7x

0.8x

0.9x

1.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

22.0x

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413


0.3x

0.4x

0.5x

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x

3.0x

6.0x

9.0x

12.0x

15.0x

18.0x

21.0x

24.0x

27.0x

30.0x

33.0x

36.0x

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413


0.3x

0.4x

0.5x

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

Service Centers Integrated/Mills

Specialty Metals Scrap

Fabricators Global

BGL Metals indices defined on Page 18.

SOURCE: S&P Capital IQ.

18

Metals Insider

Industry Valuations

Relative Valuation Trends

NOTE: Figures in bold and italic type were excluded from median and mean calculation.

(1) As of 3/3/2013.

(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.

(3) Enterprise Value is the total value of a firm (including all debt and equity).

Source: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTM

Company Name Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDA

SERVICE CENTERSReliance Steel & Aluminum Co. RS $68.53 89.3% $5,315.9 $7,351.1 0.8x 9.7x 2.8x $9,223.8 26.0% 8.2%Russel Metals Inc. TSX:RUS 29.50 103.4% 1,621.8 1,931.7 0.7x 11.7x 2.5x 3,000.7 17.3% 5.8%A. M. Castle & Co. CAS 14.47 77.6% 339.6 554.8 0.5x 20.0x 11.9x 1,053.1 12.7% 2.0%Olympic Steel Inc. ZEUS 26.82 84.7% 294.1 491.2 0.4x 11.7x 4.8x 1,263.3 20.9% 3.3%Median $28.16 87.0% $980.7 $1,243.3 0.6x 11.7x 2.8x $2,132.0 19.1% 4.5%

Mean $34.83 88.7% $1,892.9 $2,582.2 0.6x 11.0x 3.4x $3,635.2 19.2% 4.8%

INTEGRATED/MILLSNucor Corporation NUE $49.56 90.6% $15,778.2 $19,022.3 1.0x 12.2x 2.9x $19,052.0 7.4% 8.2%Steel Dynamics Inc. STLD 17.21 87.2% 3,837.9 5,615.4 0.8x 9.1x 3.4x 7,372.9 9.8% 8.4%United States Steel Corp. X 24.06 77.2% 3,481.2 6,817.2 0.4x 8.6x 5.0x 17,424.0 8.1% 4.6%Commercial Metals Company CMC 18.86 89.0% 2,212.5 3,120.0 0.5x 9.3x 4.2x 6,823.0 9.6% 4.9%AK Steel Holding Corporation AKS 6.09 71.9% 832.4 2,707.8 0.5x 8.0x 4.4x 5,570.4 8.3% 6.2%Median $18.86 87.2% $3,481.2 $5,615.4 0.5x 9.1x 4.2x $7,372.9 8.3% 6.2%

Mean $23.16 83.2% $5,228.4 $7,456.5 0.6x 9.4x 4.0x $11,248.5 8.6% 6.4%

SPECIALTY METALSAllegheny Technologies Inc. ATI $31.33 85.4% $3,382.0 $4,403.0 1.1x 26.5x 11.7x $4,043.5 6.2% 4.1%Carpenter Technology Corp. CRS 57.69 91.6% 3,061.1 3,559.2 1.6x 10.8x 1.8x 2,195.3 19.1% 14.9%RTI International Metals, Inc. RTI 26.84 74.4% 820.1 879.2 1.1x 7.3x 3.5x 783.3 22.2% 15.4%Haynes International, Inc. HAYN 49.26 88.0% 610.5 529.5 1.1x 16.1x 0.0x 462.1 13.0% 7.1%Universal Stainless & Alloy Products Inc. USAP 33.54 89.0% 233.6 323.1 1.8x 26.0x 7.2x 180.8 7.7% 6.9%Median $33.54 88.0% $820.1 $879.2 1.1x 16.1x 3.5x $783.3 13.0% 7.1%

Mean $39.73 85.7% $1,621.5 $1,938.8 1.4x 17.3x 4.9x $1,533.0 13.7% 9.7%

SCRAP Sims Metal Management Limited ASX:SGM $14.48 144.3% $1,760.2 $1,840.1 0.3x 43.2x 2.8x $6,591.9 8.4% 0.9%Schnitzer Steel Industries, Inc. SCHN 24.94 74.8% 652.6 1,021.7 0.4x 12.4x 4.9x 2,616.8 7.7% 3.1%Metalico Inc. MEA 1.96 73.1% 94.2 212.8 0.4x 13.1x 7.5x 531.9 7.9% 3.1%ITS Group ITS 8.06 95.1% 46.4 55.6 0.4x 6.0x 1.8x 117.3 8.5% 7.4%Industrial Services of America, Inc. IDSA 3.94 96.9% 27.9 48.8 0.3x NM NM 145.2 3.5% -1.0%Median $8.06 95.1% $94.2 $212.8 0.4x 12.4x 2.8x $531.9 7.9% 3.1%

Mean $10.68 96.9% $516.2 $635.8 0.4x 10.5x 3.2x $2,000.6 7.2% 2.7%

FABRICATORSPrecision Castparts Corp. PCP $256.04 93.1% $37,184.2 $40,492.2 4.2x 14.1x 1.3x $9,536.8 33.6% 30.2%Worthington Industries, Inc. WOR 59.66 92.7% 2,775.6 3,236.5 1.2x 9.8x 1.9x 2,785.8 16.1% 8.6%RBC Bearings Inc. ROLL 39.42 81.1% 1,460.2 1,352.6 3.3x 13.1x 0.1x 408.2 39.3% 25.3%Canam Group Inc. TSX:CAM 13.48 96.6% 567.3 745.7 0.8x 10.8x 2.7x 967.9 16.4% 7.4%Shiloh Industries Inc. SHLO 17.97 70.9% 307.9 424.3 0.6x 7.0x 1.9x 738.3 10.7% 8.2%Median $39.42 92.7% $1,460.2 $1,352.6 1.2x 10.8x 1.9x $967.9 16.4% 8.6%

Mean $77.31 86.9% $8,459.0 $9,250.3 2.0x 11.0x 1.6x $2,887.4 23.2% 15.9%

GLOBALArcelorMittal ENXTAM:MT $15.15 82.1% $25,044.9 $44,680.3 0.6x 6.7x 3.1x $79,440.0 7.6% 9.0%ThyssenKrupp AG XTRA:TKA 26.13 91.6% 14,788.7 19,293.1 0.4x 46.2x 18.7x 52,990.4 13.6% 1.2%Open Joint-Stock Company Severstal MICEX:CHMF 7.49 79.5% 6,068.4 9,370.9 0.8x 5.2x 2.3x 13,311.6 22.3% 15.3%Ternium S.A. TX 29.38 89.1% 5,767.5 8,291.6 1.0x 5.8x 1.4x 8,530.0 22.5% 17.2%Tata Steel Limited BSE:500470 5.67 80.8% 5,504.3 14,266.4 0.6x 5.7x 4.2x 22,774.7 41.0% 11.0%SSAB AB OM:SSAB A 7.52 86.2% 2,361.0 4,926.4 0.9x 25.2x 15.0x 5,447.6 4.9% 3.6%Median $11.33 84.1% $5,917.9 $11,818.7 0.7x 5.7x 2.7x $18,043.2 18.0% 10.0%

Mean $15.22 84.8% $9,922.5 $16,804.8 0.7x 5.8x 2.8x $30,415.7 18.7% 9.5%

TTM MarginsTTM Enterprise Value /

19

Metals Insider

Industry Valuations

Sector Performance

Source: S&P Capital IQ.Index: February 28, 2013 = 100.

70

90

110

130

150

Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14

BGL Metals - Service Centers BGL Metals - Integrated/Mills BGL Metals - Specialty Metals

BGL Metals - Scrap BGL Metals - Fabricators BGL Metals - Global

Index Performance

Metals

Market

90

100

110

120

130

Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14

S&P 500 DJIA MSCI World Index

+ 22.8%

+ 19.2%

+ 16.1%

+ 2.5%

+ 14.3%

+ 8.6%

- 14.6%

+ 34.7%

+ 4.2%

20

The information contained in this publication was derived from proprietary research conducted by a division or owned or affi liated entity of Brown Gibbons Lang & Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and signifi cant subjective assumptions and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially. We do not expect to, and assume no obligation to update or otherwise revise this publication or any information contained herein. Neither Brown Gibbons Lang & Company LLC, nor any of its offi cers, directors, employees, affi liates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy, completeness or fi tness of any information contained in this publication, and no legal liability is assumed or is to be implied against any of the aforementioned with respect thereto. This publication does not constitute the giving of investment advice, nor a part of any advice on investment decisions and nothing in this publica-tion is intended to be a recommendation of a specifi c security or company, nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably suffi cient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affi liates and their offi cers, direc-tors, employees or affi liates, or members of their families, may have a benefi cial interest in the securities of a specifi c company mentioned in this publication and may purchase or sell such securities in the open market or otherwise. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer to buy or sell any security.

Global Metals Practice

For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.

• Welded and seamless pipe and tubing manufacturers

• Forging operations

• Alloy production

• High precision metal fabrication

• Stainless and aluminum sheet processing

• Flat-rolled carbon production

• Metal distribution

• Material and supply chain management

• Iron casting manufacturing

• Steel casting manufacturing

• Investment casting manufacturing

• Aluminum and zinc diecasting

• Ferrous scrap metal recycling

• Non-ferrous scrap metal recycling

• E-waste recycling

Service CentersManufacturing

• Independent investment banking advisory fi rm focused on the middle market

• Senior bankers with signifi cant experience and tenure; partners average over 20 years of experience

• Offi ces in Chicago, Cleveland, Miami, and Salt Lake City

Who We AreLeading Independent Firm

• Founding member and the exclusive U.S. partner of Global M&A Partners Ltd., the world’s leading partnership of investment banking fi rms focusing on middle market transactions

• Deep industry experience across core sectors of focus, including: Business Services, Energy and Environmental Services, Consumer Products and Retail Services, Healthcare and Life Sciences, Industrials, Metals and Metals Processing, and Real Estate

Comprehensive Capabilities

Casting/Foundry

Sell-Side Advisory

Acquisitions & Divestitures

Public & Private Mergers

Special Committee Advice

Strategic Partnerships& Joint Venture Formation

Fairness Opinions & Fair Value Opinions

M&A Advisory Private Placements

All Tranches ofDebt & Equity Capital for:

Growth

Acquisitions

Recapitalizations

Dividends

General Financial& Strategic Advice

Balance SheetRestructurings

Sales of Non-CoreAssets or Businesses

§363 Auctions

Financial Advisory

Metals Recycling

21

Global Metals Practice

bglco.com globalma.com

Scott T. BerlinHead: Metals and Metals [email protected]

Michael V. GoettemoellerVice [email protected]

BGL Contacts:For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.

Representative Transactions:

acquired by

acquired by

Samuel, Son & Co., Limited

acquired by

acquired by Scott Process Systems, Inc.

Review of Strategic Alternativesand Sale of Business

to an Undisclosed Buyer

acquired by

The melting operations of

acquired by

The recycling operations of

divested

toacquired by

TAD Metals, Inc.

a portfolio company of

acquired by

acquired by

TINICUM CAPITALPARTNERS II, L.P. acquired by

and its affiliate

Aerospace InternationalMaterials-OEM, LLC

Weldedaluminum tube manufacturer

Pending Sale

Aluminumplate and

sheetdistributor

Pending Sale

National provider of industrial scrap recycling services

Pending Sale

Manufacturer ofcold fi nished

steel bars

Pending Sale Pending Sale

acquired by

a portfolio company of

acquired byacquired by

Roll formservicecenter

22

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