Community Chat: Olympic CEO Bullish on Demand, M&A Opportunities

Although the automotive industry is still struggling with supply chain issues, the long-term outlook for this end market is good, as low inventories and a continually aging fleet will need to be replaced, he said.

The outlook for the energy markets is also good because the world is facing a global energy crisis, and a lot of attention and money is flowing towards green energy. In the meantime, money will have to continue to be spent on traditional energy sources as well, Marabito noted.

Monies from the infrastructure bill will begin to be spent next year and will have a 6-8 year run, so infrastructure is a particularly strong end market to watch. Opportunities should be abundant in roads, bridges, ports, waterworks, and transit. Ancillary spending on construction sites should be a boon as well, including for the heavy equipment needed to do the building and repairs. Marabito predicted 2-3 million tons of steel per year will be needed for infrastructure over the next eight years. “That’s a power boost on top of whatever the normal economy will be,” he said.

Olympic is also bullish on the stainless and aluminum markets. It forecasts strong demand growth in white metals end-use markets such as industrial appliances, hotels, hospitals, and healthcare due to a large, aging baby boomer population.

When asked about consolidation in the steel business, Marabito expressed much enthusiasm. The normal cadence of selling has been off over the last 3-4 years because of circumstances in the market. But that should change with the industry coming off a good 2021 and a good first half of 2022, he said.

“I can tell you with certainty the amount of opportunities out there are far and away the most we’ve seen since 2018, maybe even before that…At Olympic, we’re looking at more opportunities than we’ve seen in a long time,” Marabito said.

Marabito said Olympic is actively looking at a handful of M&A opportunities in all of its business segments and expects to make one or more this year. The company is evaluating opportunities in carbon metals, pipe and tube, white metals, aluminum, as well as downstream operations.

Steelmakers making downstream acquisitions (Nucor’s recent $3 billion purchase of CHI Overhead Doors is one example) could impact the service center industry and could change some relationships within the supply chain, Marabito said.

“There’s money to be invested, and there’s lots of ways to do it other than the traditional ways,” he said. “You’re going to see mills and service centers move into areas that maybe are a little outside the individual, traditional core – and it’s not necessarily a bad thing.”

Marabito said the marketplace is already beginning to see the impact of new steelmaking capacity coming online, with prices falling and lead times shortening. The conversation that needs to be happen more often, however, is the capacity that’s been taken out of the equation over the past few years and that which may be taken out moving forward.

Editor’s note: Missed the Community Chat with Rick Marabito? No problem. Click here for a recording of this and past SMU webinars.

The next SMU Community Chat will feature an update from analyst Timna Tanners, managing director of metals and mining at Wolfe Research, on June 29 at 11am ET. Click here to register.

By Laura Miller, Laura@SteelMarketUpdate.com