Industrial Investment Banking Round-Up Capital Markets Perspectives As of November 13 th , 2020 Sources: CNBC, WSJ, Dealogic, KeyBanc Capital Markets Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity. Real-Time Market Perspectives • Both business and academic forecasts anticipate that the U.S. economic recovery will remain on track after the presidential election, with a potential COVID-19 vaccine and a new fiscal stimulus package in sight – Forecasts for year-end 2020 anticipate an unemployment rate of 6.7% versus the October estimate of 7.8%, while GDP is forecasted to contract 2.7% versus the October estimate of 3.6% ▪ GDP expansions are forecasted in 2021 and 2022 for 3.6% and 2.9%, respectively, only slightly lower than the October estimate • Consumer prices were flat in October following four straight months of gains, a sign of subdued inflation as COVID-19 cases are resurging across the U.S. – On a non-seasonally adjusted basis in October 2020, the overall consumer-price index rose 1.2% and core prices increased 1.6% compared to the prior year M&A Markets • U.S. M&A activity continues to ramp up, with Q4 2020 already having $225.9 billion of M&A deals announced, raising expectations of a strong finish to 2020 and a busy start to 2021 – U.S. sponsor-related M&A activity in Q4 2020 is at $26.6 billion of exits and $22.8 billion of entries – SPACs continue to play an active role in M&A this year, with $94.4 billion of M&A activity recorded year-to-date, of which $19.6 billion are sponsor to SPAC exits Debt Capital Markets • After a surge in deal flow over the past several weeks, leveraged loan new-issue activity came to a halt during the week of the election, with few issuers electing to postpone their launch timelines due to the volatile market conditions • Several LBO and M&A deals have been announced as arrangers started to line up transactions before the holiday weeks – Total M&A volume this October was $17.0 billion with LBOs representing 56%, the most since January – Dividend recap volume remains strong with a monthly total at $10.5 billion • Leveraged loan transactions in the middle market are heavily skewed towards technology businesses that are considered resilient to the pandemic, M&A activity continues to pick up with arrangers expecting Q4 pipeline to improve • High yield bond issuance is at $393 billion year-to-date, which is up 70% over last year's comparable period, and is set to surpass the prior record of $399 billion set in 2013 – The current dynamic of strong markets mixed with increased risk of shutting the economy down has incentivized issuers to borrow while they still can, indicating a busy November until the Thanksgiving break – High yield bond refinancings continue to lead new issuance with over half of the deals in October used to repay debt • M&A accounted for 20% of high yield bond deals at this time last year, with only 8% accounting for year-to-date 2020 – The high yield bond market has recently been more receptive to M&A, a trend that continues to improve • The investment grade fixed income market only had one deal come to market during the presidential election week, yet was still well received • Following the election, the investment grade fixed income market opened with a strong tone following the announcement of a potential vaccine – In addition to equities being up, U.S. treasury yields increased significantly with the 10-year treasury currently at 90 bps after getting within 2 bps of the 1% level – Credit spreads also came in at 8 bps, with the IG index closed out at 116 bps – the lowest level since February – Monday and Tuesday of this week were both busy issuance days, totaling $34+ billion and surpassing weekly estimates Equity Capital Markets • Equity issuance slowed down leading up to the presidential election as volatility in the equity markets was elevated due to the rise of COVID-19 cases worldwide, lack of stimulus and election outcome uncertainty • Volatility has also subsided and the equity issuance market is expected to be robust to close out 2020 supported by several IPOs and follow-on offerings anticipated – Currently there are 59 SPAC IPOs filed in the pipeline, which accounts for 50% of the total current U.S. IPO pipeline
22
Embed
Industrial Investment Banking Round-Up · 2021. 2. 1. · Industrial Investment Banking Round-Up Capital Markets Perspectives As of November 13th, 2020 Sources: CNBC, WSJ, Dealogic,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Sources: CNBC, WSJ, Dealogic, KeyBanc Capital Markets
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets
Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its
licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our
research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied
upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This
report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Real-Time Market Perspectives
• Both business and academic forecasts anticipate that the U.S. economic recovery will remain on track after the presidential
election, with a potential COVID-19 vaccine and a new fiscal stimulus package in sight
– Forecasts for year-end 2020 anticipate an unemployment rate of 6.7% versus the October estimate of 7.8%, while GDP is forecasted to
contract 2.7% versus the October estimate of 3.6%
▪ GDP expansions are forecasted in 2021 and 2022 for 3.6% and 2.9%, respectively, only slightly lower than the October estimate
• Consumer prices were flat in October following four straight months of gains, a sign of subdued inflation as COVID-19 cases
are resurging across the U.S.
– On a non-seasonally adjusted basis in October 2020, the overall consumer-price index rose 1.2% and core prices increased 1.6%
compared to the prior year
M&A Markets
• U.S. M&A activity continues to ramp up, with Q4 2020 already having $225.9 billion of M&A deals announced, raising
expectations of a strong finish to 2020 and a busy start to 2021
– U.S. sponsor-related M&A activity in Q4 2020 is at $26.6 billion of exits and $22.8 billion of entries
– SPACs continue to play an active role in M&A this year, with $94.4 billion of M&A activity recorded year-to-date, of which $19.6 billion
are sponsor to SPAC exits
Debt Capital Markets
• After a surge in deal flow over the past several weeks, leveraged loan new-issue activity came to a halt during the week of the
election, with few issuers electing to postpone their launch timelines due to the volatile market conditions
• Several LBO and M&A deals have been announced as arrangers started to line up transactions before the holiday weeks
– Total M&A volume this October was $17.0 billion with LBOs representing 56%, the most since January
– Dividend recap volume remains strong with a monthly total at $10.5 billion
• Leveraged loan transactions in the middle market are heavily skewed towards technology businesses that are considered
resilient to the pandemic, M&A activity continues to pick up with arrangers expecting Q4 pipeline to improve
• High yield bond issuance is at $393 billion year-to-date, which is up 70% over last year's comparable period, and is set to
surpass the prior record of $399 billion set in 2013
– The current dynamic of strong markets mixed with increased risk of shutting the economy down has incentivized issuers to borrow while
they still can, indicating a busy November until the Thanksgiving break
– High yield bond refinancings continue to lead new issuance with over half of the deals in October used to repay debt
• M&A accounted for 20% of high yield bond deals at this time last year, with only 8% accounting for year-to-date 2020
– The high yield bond market has recently been more receptive to M&A, a trend that continues to improve
• The investment grade fixed income market only had one deal come to market during the presidential election week, yet was still
well received
• Following the election, the investment grade fixed income market opened with a strong tone following the announcement of a
potential vaccine
– In addition to equities being up, U.S. treasury yields increased significantly with the 10-year treasury currently at 90 bps after getting
within 2 bps of the 1% level
– Credit spreads also came in at 8 bps, with the IG index closed out at 116 bps – the lowest level since February
– Monday and Tuesday of this week were both busy issuance days, totaling $34+ billion and surpassing weekly estimates
Equity Capital Markets
• Equity issuance slowed down leading up to the presidential election as volatility in the equity markets was elevated due to the
rise of COVID-19 cases worldwide, lack of stimulus and election outcome uncertainty
• Volatility has also subsided and the equity issuance market is expected to be robust to close out 2020 supported by several
IPOs and follow-on offerings anticipated
– Currently there are 59 SPAC IPOs filed in the pipeline, which accounts for 50% of the total current U.S. IPO pipeline
Industrial Investment Banking Round-UpBuilding ProductsAs of November 13th, 2020
Building Products Market Perspective• Employment conditions improved last week while the Labor Department recorded 709,000 new unemployment claims, just
above economists’ estimates of 740,000
– Last week represented the fourth straight week of declining new unemployment claims. Despite this, first-time unemployment claims remain well above the pre-pandemic record of 695,000 that was set in 1982
– Additionally, the Labor Department recorded a significant drop in continuing unemployment claims, which decreased by 436,000 this week to 6.8 million
• JELD-WEN reported earnings; revenue grew 1.9% to $112.9 million and adjusted EBITDA increased by 20.0% to $130.7 million compared to the third quarter of last year
– Gary S. Michael, CEO of JELD, reported strong growth in both the residential and new construction end markets during the Company’s Q3 earnings release, driven by “consumers' focus on their homes, coupled with [JELD’s] strategy to deliver profitable market share with key customers”
• BMC Stock Holdings reported a record third quarter performance, growing revenue by 13.1% to $1090.3 million and increasing adjusted EBITDA 32.9% to $99.2 million
– David Flitman, President and CEO of BMC, attributed the performance to robust demand in the Company’s single-family homes and pro remodel segments, as well as record high lumber prices. Mr. Flitman also noted strong results from BMC’s Operating System-led productivity and cost savings initiatives
• Pfizer’s vaccine announcement on Monday had an immediate impact on the homebuilding industry
― Rapidly decreasing mortgage demand has caused the rate to rebound from record lows, driving homebuilder’s cost of business higher
― Investors have demonstrated concern with the longevity of the suburban-flight trend that homebuilders have relied on throughout the pandemic, which may end with the successful distribution of a vaccine
― Notable homebuilding stocks such as D.R. Horton reeled on the vaccine news, despite posting a record third quarter performance
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
For additional information on KeyBanc Capital Markets, please contact any of the individuals listed below:Building Products Team
Public Company Stock Performance Since February 21 Public Company Trading Performance Since February 21
Chemicals & Materials Market Perspectives• The Chemicals indexes net moved sideways in the last month, with Specialties up 0.86% and Commodities / Diversifieds up 0.90%
– US Presidential / national elections and Pfizer’s COVID vaccine announcement did not create a meaningful value change overall• M&A continued its strong momentum
– Materials Technologies made an unsolicited approach for Elementis– 40 North Management made an unsolicited approach for W.R. Grace– Recticel will acquire Fritz Nauer– Wynnchurch acquired Drew Foam– HIRSCH Servo acquired Novopol– Fuchs Petrolub acquired PolySi Technologies– Advanced Emissions Solutions will acquire the Activated Carbon Manufacturing business of Caddo Creek Resources– DuPont will sell its Biomaterials business to an un-named acquiror– The McGregor Company acquired HydroGro– Nucor will acquire a paint line facility in Armorel, AR from Precoat Metals– Pidilite industries acquired Huntsman Advanced Material Solutions– Ticer Technologies will acquire certain deposition / sputtering assets from Materion– Metrika SGA acquired Allegrini– Maven Capital Partners acquired FIS Chemicals– Atkore International acquired Queen City Plastics– ICP acquired Leeson Polyurethanes– Greenfield Global will acquire Corn Plus ethanol facility in Winnebago, MN– Cargill will acquire International Flora Technologies– Orchard Creek Capital acquired Advantage Plastics and Sherri Plastics– Akzo Nobel will acquire the Titanlux and Titan Powder Coatings divisions of Industrias Titan– Brenntag will acquire Comelt– Alpek will acquire the expandable styrenics business of NOVA Chemicals– Element Solutions acquired IWTS– AOC acquired the UPR business of Spolchemi
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Trading Perspectives by Sector
Share Price Performance by Sector Enterprise Value / NTM EBITDA
For additional information on KeyBanc Capital Markets, please contact any of the individuals listed below:Chemicals and Materials Team
Industrial Investment Banking Round-UpDiversified IndustrialsAs of November 13th, 2020
5.0x
10.0x
15.0x
20.0x
Sources: IHS Markit, Wall Street Research, Capital IQ market data as of 11/11/201 PMI shown is a GDP-weighted average of the survey manufacturing and services indices; readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 signal contractionCapital Goods: CFX, GNRC, LECO, MTW, THR, TNC; Construction: ASTE, CAT, DE, MTW, TEX; Engineered Components: EPAC, HI, KMT, NPO, NVT; Flow Control / Water: AOS, AQUA, BMI, FELE, PNR, WTS, XYL; Food Equipment: ITW, JBT, MIDD, WBT; Industrial Technology: CTS, GGG, IEX, LFUS, NDSN; Large Cap Diversifieds: AME, DOV, EMR, ETN, HON, ITW, JCI, PH; Power Transmission: AIMC, RBC, RXN, TKR; Diversified Index: Average of all indexes
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Recent Trends in ManufacturingGlobal PMI Sees Strong Start to Q4
• Global PMI™ surveys, compiled by IHS Markit, indicated a solid start to the fourth quarter for the global economy, with October business activity rising at the fastest rate in more than two years
– PMI rose from 52.5 in September to 53.3 in October and has now indicated expanding business activity for four successive months; this reflects a rebound in economic activity in the third quarter and at the start of the fourth quarter, after the COVID-19 pandemic caused an unprecedented collapse during the second quarter
– However, the recovery signaled by the global PMI remains only modest in terms of GDP growth → the PMI is running at a level consistent with annualized GDP growth of just over 3%
Businesses Remain Cautious, but Confidence has Improved
• Business confidence improved as companies have grown more optimistic about the remainder of 2020 and the start of 2021
– The survey's gauge of firms' expectations for their own output in 12 months time rose sharply in October, reaching the highest level since June 2018 → positive sentiment was linked to encouraging vaccine development headlines as well as expectations of further government stimulus
• Firms remained cautious with regard to hiring, keeping payroll numbers steady on average amid worries about the impact of second COVID-19 waves, which has cast a shadow over recovery prospects in the coming months
– The reluctance to boost headcounts is unusual given the increase in backlogs of uncompleted work in recent months, and also hints at a reluctance to add to staff costs due to an uncertain near-term demand outlook
For additional information on KeyBanc Capital Markets, please contact any of the individuals listed below:Diversified Industrials Team
Diversified Industrials EV / LTM EBITDA Trading Dashboard
17.3x17.5x
22.3x
17.5x17.6x
11.0x
12.0x
17.3x
Overall, diversified industrials sector valuations have fully recovered, and in some cases exceeded pre-pandemic levels
Global Employment by Broad Sector
Category Current1-Month
Avg.r vs.
1-MonthYTD Avg.
r vs. YTD
Industrial Technology 22.3x 21.7x 0.6x 18.2x 4.1x
Food Equipment 20.9x 19.4x 1.5x 15.7x 5.2x
Construction 17.6x 16.6x 0.9x 12.6x 4.9x
Flow Control / Water 17.5x 17.2x 0.3x 14.6x 2.9x
Large Cap Diversifieds 17.5x 15.8x 1.7x 13.3x 4.2x
Capital Goods 17.3x 16.4x 1.0x 13.0x 4.4x
Diversified Index 17.3x 16.0x 1.3x 13.1x 4.3x
Power Transmission 12.0x 11.5x 0.5x 9.3x 2.6x
Engineered Components 11.0x 10.5x 0.5x 9.8x 1.2x
Global PMI Output & Economic Growth 1
Global PMI by IHS Markit Global GDP annual % change
Industrial Investment Banking Round-UpIndustrial & Business Services
As of November 13th, 2020
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets
Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its
licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our
research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied
upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This
report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
For additional information on KeyBanc Capital Markets, please contact any of the individuals listed below:
• According to a recent MDM survey of more than 500 distributors, Q3 saw an average revenue decline of 3.2% YoY across
distribution as a whole, ~80 basis points higher than the forecasted revenue dip
– The continued recovery saw eight sectors posting YoY revenue growth for the third quarter, up from just two during Q2, with distributors of
outdoor living and building materials / home improvement products performing the strongest
▪ The remaining 12 sectors posting YoY revenue declines continue to moderate losses, with only four sectors seeing double-digit declines
▪ Forecasts continue to improve, with YoY revenue expected to decline just 0.3% overall across distribution during the fourth quarter
– Overwhelming industry sentiment is that the trough was not as deep as feared and the recovery was much quicker than expected
▪ One of the toughest challenges distributors faced during the peak of the pandemic was unpredictability around product sourcing and customer
demand
▪ Hiring trends remain mixed, with businesses whose performance remains soft slowing their hiring efforts, while other seek employees with digital skills
• FCH Sourcing Network’s monthly Fastener Distributor Index showed a seasonally adjusted reading of 56.5 during October, up
4.5 points MoM
– FDI’s forward-looking indicator, a measure of respondents’ expectations of future fastener market conditions, rose to 64.5 in October,
reaching a new year high and increasing 11.4 points since August
• In its most recent monthly trends report, Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) reported an
average sales increase of 13.9% for its members, driven by historically low mortgage rates, increased consumer confidence
and the continued employment recovery
• Distributors continue to see strong performance in the equity markets, up 145% on average from 52-week lows → oil & gas and
food / foodservice distributors, hit the hardest by COVID, are currently trading 61% and 244% above 52-week lows, respectively
– According to select industry participants, inventory levels and supply chains are in strong positions as the initial demand recovery appears
to be underway
Sources: MDM, Industrial Distribution1 Leverage = Index Average Net Debt / NTM EBITDA
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets
Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its
licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our
research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied
upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This
report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc.,
Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed
securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department.
The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does
not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general
information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Aluminum
▪ On October 27, President Trump signed a proclamation ending the 10% duties on Canadian aluminum imports. The
tariffs, which were reinstated in August, were removed on the expectation that Canadian imports would decrease 50%
through the end of 2020. The proclamation also stated the U.S. would consider reinstating the duties if imports increased
above expectations
Steel
▪ U.S. Steel has announced the successful start-up of its electric arc furnace (‘EAF’) at its tubular steel plant in Fairfield,
AL. Part of $412 million investment at the facility, Fairfield EAF #1 is the first furnace of its kind for U.S. Steel
(independent from its investment in Big River Steel) and has an annual melting capacity of ~1.5 million metric tons. The
furnace will employ 150 full time employees and is expected to reach full capacity in 2021
▪ Ternium now plans to begin production at its hot-rolling mill in Pesquería, Mexico (near Monterrey) in July of 2021.
Start-up of the facility was previously planned for the 4Q of 2020, then delayed to April 2021 due to the Covid-19
pandemic. The mill will have an annual production capacity of 4.1 million metric tons, however the Company’s timeline
for a ramp-up to full production has not been disclosed
▪ Domestic steel production continues to ramp-up, driven by rebounding demand following Covid-19 shutdowns. U.S.
crude steel production increased for the seventh week in a row through the first week of November, increasing ~1.0%
WoW, with mills producing ~1.4 million metric tons at an average capacity utilization of 71.1% (see pg. 4)
Copper, Lead and Zinc
▪ U.S. premiums for special high-grade (‘SHG’) zinc ingot rose for the first time in five months, primarily driven by steadily
improving demand from the automotive sector, which is a major consumer of hot-dipped galvanized steel coil. In the first
week of November, the U.S. Midwest premium for SHG zinc ingot increased to 8 – 8.75 cents per pound from 8 – 8.5
cents per pound, a range which it held since late May
Specialty & Alloys
▪ U.S. ferro-titanium pricing has moderated on slowing volumes, following a six-week rally. Ferro-titanium markets have
faced a significant supply deficit, driven by a shortage in titanium scrap used to produce it. Sellers in the U.S. market are
holding out for higher prices, expecting improving demand from steel consumers and the historic scrap shortage
worsening to drive pricing
Mining, Scrap and Materials
▪ U.S. Steel has announced plans to restart Keetac, the Company’s iron ore mining and pelletizing operations located in
Keewatin, MN. The facility has an annual capacity of ~5.4 million metric tons and was idled in May 2020 due to a plunge
in demand for iron units for steelmaking linked to the Covid-19 pandemic. The restart will help the Company build pellet
inventories to feed U.S. Steel’s blast furnaces over the winter months, when locks on the Great Lakes are closed. The
Company plans to restart the plant by the end of 2020 and will collaborate with the United Steelworkers union to fill
Ferrous & Non-Ferrous Scrap Prices (through November 6, 2020)
Source: U.S. Census Bureau, American Metal Market1 Scrap trade data through 9/30/2020; $ in millions
Ferrous Monthly Scrap Net Exports 1 Non-Ferrous Monthly Scrap Net Exports 1
225
$0
$100
$200
$300
$400
$500
Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
Industry fundamentals (continued…)
October 29, 2020
X - ALERT: 3Q20 Exceeds Expectations on
Volumes; FCFE + on NWC Release
November 3, 2020
TMST: Headwinds Remain Fierce; SW
October 28, 2020
RYI - ALERT: 3Q20 Beats via LIFO, Tax; FCFE
Robust on NWC Wizardry
8
1 KeyBanc Capital Markets’ Industrial Research platform has consistently achieved a Top 3 ranking in Greenwich Associates annual survey of small / mid-cap fund
managers. In its June 2019 Analyst Awards, ThomsonReuters recognized Phil Gibbs as the #1 earnings estimator in the Metals & Mining sector
KeyBanc Capital Markets’ top-ranked 1 equity research team covers numerous companies across the Metals and Mining
sector. Selected recent research notes are provided below. Click on the respective “tear out” to read the entire note.
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc.,
Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed
securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department.
The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does
not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general
information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.
Industrial Investment Banking Round-UpPaper and PackagingAs of November 13th, 2020
Earnings News• Public companies announced their earnings for the third quarter; weighted average year-over-year change was as follows:
– Rigid Packaging: Sales up 2%; Adj. EBITDA up 8%
– Paper-Based Packaging: Sales down 1%; Adj. EBITDA down 11%
– Flexible Packaging: Sales flat; Adj. EBITDA up 8%
– Labels: Sales down 2%; Adj EBITDA up 11%
– Pulp & Paper: Sales down 15%; Adj. EBITDA down 21%
– Commercial Printing: Sales down 18%; Adj. EBITDA down 3%
General News• Sonoco plans to close its Yakima plastic thermoforming plant in December
Mergers & Acquisitions• Westhook Capital made an investment in RainShadow Labs, which provides private label manufacturing services
• Wynnchurch Capital acquired Drew Foam from Branford Castle Partners
• Saothair Capital Partners acquired the assets of catalog printing specialist Arandell out of Chapter 11
• Qualfon acquired MAR Graphics, a print mail and digital solutions provider
• The BoxMaker has agreed to acquire Tango Press, an all-digital production plant for corrugated packaging and displays
• The Shamrock Companies acquired Cincinnati Print Solutions, a print management company
• Pregis, owned by Warburg Pincus, acquired Technical Machinery Solutions and the Graphic Innovators business
• Behrens Investment Group agreed to acquire the assets of Gorham Paper and Tissue and White Mountain Tissue out of Ch. 11
• Golden West Packaging, owned by Lindsay Goldberg, acquired Berry Pack and Progressive Packaging Group
• Berlin Packaging, owned by Oak Hill Capital, acquired Consolidated Bottle Corporation
• Quad/Graphics sold its two remaining book manufacturing facilities to Berryville Graphics, a division of Bertelsmann Printing
• ePost Global acquired the International Mail and Parcel Logistics Business of R.R. Donnelley & Sons Company
• Resource Label Group, owned by First Atlantic Capital, acquired McDowell Packaging & Advertising
• Revolution, owned by Arsenal Capital, acquired Polar Plastics Corporation from Spell Capital Partners
• DCG ONE, owned by Clavis Capital, acquired Vertigo Partners, a qualitative market and user research firm
• Brook and Whittle, owned by Snow Phipps, announced a partnership with Tri Print
• Western Shield Label Company, owned by ACI Capital, has acquired The Label Smith
• Wind Point Partners acquired Handgards, Inc., a manufacturer and supplier of foodservice disposable products
Disclosure: KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. This report was not issued by our research department. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual person or entity.