Many metals and mining organizations are already fighting off fierce competition from lower-cost imports in their home markets and reduced demand from the emerging markets. And with growth in the global economy expected to remain slow, metals and mining organizations are increasingly focused on growing their existing markets and product lines.

"With China continuing to struggle with massive overcapacity, particularly in the steel sector, we expect investments to focus largely on shifting manufacturing operations towards higher-quality products to respond to China’s own shift towards value-added manufacturing," notes Eric Damotte. "China may make tons of steel, but very little of it is currently at the quality required by – for example – China’s growing automotive industry."

Indeed, our data indicates that metals organizations are refocusing their investments into driving growth in their larger markets – China and the Americas in particular. Forty-six percent of metals organizations with existing investments in North America say they will 'significantly' increase investment in that market over the next 2 years while 57 percent of respondents with investments in China also say they will grow their investments significantly.

While mining organizations are not able to shift their locations or their seams of ore, our experience suggests that miners are increasingly looking further afield for acquisitions that might improve their efficiency or diversity. "We will certainly see some M&A in the sector over the coming years, particularly in certain geographies where miners are looking to build scale," notes Sharman. "However, there continues to be a significant bid/ask price gap as potential purchasers look to take advantage of the low price environment to negotiate for lower valuations."

Metals and mining organizations are certainly thinking about how to create the optimal footprint to match their expectations for future growth, but they are also highly focused on consolidating operations into lower-cost jurisdictions that provide access to customers and reflect evolving trade barriers while also helping manage margins. As such, we expect to see further asset restructuring as metals organizations start to execute on their investment strategies.

How are leading metals organizations responding? 

• Rethinking their global footprint to growth markets while taking advantage of opportunities for improved cost structures
• Aligning their growth investments with expected shifts in customer footprints as key sectors – such as auto-body manufacturing – move closer to customers in lower cost and growing destinations
• Understanding the impact of new and emerging trade tariffs, barriers and protections within key markets and reassessing the make versus import equation.

How are leading mining organizations responding?

• Exploring opportunities to purchase high value assets in new geographic markets to improve cost efficiencies or drive scale
• Rigorously assessing the potential risks involved in new acquisitions to improve project certainty and confidence around earnings and cash flow
• Continuing to reshape their portfolio of assets, products and markets to create the optimal footprint for sustainable growth.

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