Mergers: Commission opens in-depth investigation into proposed acquisition of Metallo by Aurubis

metals

(Christopher Burns, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has opened an in-depth investigation to assess the proposed acquisition of Metallo by Aurubis, under the EU Merger Regulation. The Commission is concerned that the acquisition may reduce competition in the purchasing of copper scrap for refining.

Commissioner Margrethe Vestager, responsible for competition policy, said: ”Demand for copper is likely to increase, notably also due to the growing importance of electric cars. A well-functioning, competitive copper recycling industry is key to meet the future needs of European industry and to limit the impact on the environment. The Commission will carefully assess the merger between Aurubis and Metallo, the two leading copper scrap refiners in Europe, to ensure the transaction would not negatively affect competition in this important sector.”

Aurubis is a vertically integrated provider of non-ferrous metals and the leading player in the copper industry in Europe. Metallo is a comparatively smaller but innovative company processing and refining non-ferrous metal scrap, in particular copper scrap. Both companies purchase large quantities of copper scrap for refining.

Copper is 100% recyclable and copper scrap is becoming an increasingly important input for the production of copper products, such as copper cathodes, wire rods and shapes. A significant share of copper scrap is generated directly or indirectly by manufacturing activities.

The Commission’s preliminary competition concerns

The merger would bring together the two largest purchasers and refiners of copper scarp in Europe, leading to very large combined market shares in the purchasing and refining of copper scrap.

The preliminary investigation suggests that the two companies are each other’s closest competitors, in particular for the purchasing and refining of complex and tin-bearing copper scrap. For companies who supply these materials, Aurubis and Metallo could currently be the only two viable purchasers.

The initial investigation also suggests that exporting certain types of copper scrap might not be a viable alternative, as there appear to be regulatory limits to exporting certain types of waste and as the costs of long freight as well as other factors may make export unprofitable.

Therefore, at this stage, the Commission is concerned that, following the transaction, the merged entity could hold a dominant position in the procurement of copper scrap for refining, giving it increased buyer power to negotiate lower prices for the copper scarp it purchases. By preventing competition on price, the merger could thus disrupt the normal functioning of the copper recycling industry, lowering the incentives for recyclers to collect and sort copper scrap.

The Commission will also further investigate the following issues:

  • Lower prices for copper scrap could translate into higher costs for industrial manufacturers which generate copper scrap as a by-product of their industrial production. These manufacturers may pass on their overall increased costs to their customers, which in turn may lead to higher prices for manufactured products.
  • Aurubis is the largest producer in the European Economic Area (EEA) in the downstream markets for copper cathodes and wire rods. With the acquisition of Metallo, Aurubis could gain control over the supply of important inputs for these products. The Commission will further investigate whether the merger will increase Aurubis’ incentives and ability to restrict the ability of its actual or potential rivals to compete effectively.

The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition.

The transaction was initially notified to the Commission on 30 August 2019 and subsequently withdrawn. The transaction was notified to the Commission again on 14 October 2019. Aurubis and Metallo have decided not to submit commitments during the initial investigation to address the Commission’s preliminary concerns. The Commission now has 90 working days, until 3 April 2020, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Companies and products

Aurubis, based in Germany, is a worldwide provider of non-ferrous metals and the largest integrated European copper producer. Aurubis processes copper concentrates and copper scrap and produces copper cathodes and by-products of the copper refining process. The company also supplies copper shapes and semi-finished copper as well as copper alloy products such as flat rolled, bars, rods and wires.

Metallo, based in Belgium, is active in the recycling, processing and trading of non-ferrous metals. In particular, Metallo refines copper scrap to produce copper anodes, copper cathodes, tin, lead and other by-products of the refining process.

Merger control and procedure

The Commission has the duty to assess mergers and acquisitions that have been referred to it by EU Member States and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there are three ongoing Phase II merger investigations: the proposed acquisition of Chantiers de l’Atlantique by Fincantieri, the proposed creation of two joint ventures by Boeing and Embraer and the proposed acquisition of Lotos by PKN Orlen.

More information will be available on the Commission’s competition website, in the Commission’s public case register under the case number M.9409.

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