Big Money's In Motion In Steel Trade
By ALAN R. ELLIOTT, INVESTOR'S BUSINESS DAILY
Three merger deals among top 20 industries this week have powerful ties to the steel industry.
Caterpillar (CAT) reported Monday it would pay $8.6 billion for Bucyrus International (BUCY), boosting the construction and mining equipment group into the top 20 ranks.
On Wednesday, specialty steel maker Allegheny Technologies (ATI) said it would buy Ladish (LDSH), a leader in high-value aerospace and industrial components, for $778 million. Ladish is part of the Metal-Processing and Fabrication industry group, ranked No. 17 Thursday.
In the Energy-Coal group, coking coal miner Walter Energy (WLT) announced Thursday it would pay $3.25 billion for Vancouver-based Western Coal. The coal group ranked No. 16 Thursday.
Bucyrus makes large-scale mining equipment. The equipment is used most often in the mining of coal and iron ore, which are critical to steel making. Ladish boosts Allegheny's ability to forge and fabricate super alloy components used in aerospace and industrial parts. The Walter/Western coal combination aims to create a coking coal entity able to command more pricing power, particularly in Asia.
Will competition for additional, steel-related deals boost these groups the way recent consolidation drove the computer data storage and software security stocks?
On the coal side, Stephen Doyle, president of Doyle Trading Consultants, says the Walter deal is just one in a continuing string of coking coal mergers. He points to ICG (ICO), Patriot Coal (PCX) and Massey (MEE) as names to watch.
On the steel side, Mark Parr with KeyBanc Capital Markets said the Allegheny deal could mark a turning point, that steel makers may be "re-engaging an ongoing process after several quarters of being more focused on generating and holding cash."