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European Commission to investigate Aurubis acquisition of Metallo

Regulators will study whether proposed deal will reduce competition in the copper scrap market.

November 22, 2019

The European Commission (EC) has opened an investigation into the proposed acquisition of Metallo by Aurubis, Hamburg, Germany, under the EU Merger Regulation. The commission is concerned that the acquisition could reduce competition in copper scrap purchasing for refining. Aurubis first announced plans to acquire Metallo for €380 million ($421 million) this past May.

EC Commissioner Margrethe Vestager, who is responsible for competition policy, says, “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 nonferrous metals and a major player in the European copper industry. Metallo, based in Belgium, processes and refines nonferrous metal scrap, especially copper scrap.

The commission has outlined its preliminary competition concerns:

  • The merger would bring together the two largest purchasers and refiners of copper scrap in Europe, leading to very large combined market share in the purchasing and refining of copper scrap.
  • The preliminary investigation suggests that the two companies are each other's closest competitors, especially for purchasing and refining of complex and tin-bearing copper scrap. For companies that supply these materials, Aurubis and Metallo could currently be the only two viable purchasers.
  • The initial investigation 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 scrap and as the costs of long freight as well as other factors could make export unprofitable.

An area of concern for the EC is 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 scrap 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 whether lower prices for copper scrap could translate into higher costs for industrial manufacturers, which generate copper scrap as a byproduct of their industrial production. These manufacturers could pass on their overall increased costs to their customers, which in turn may lead to higher prices for manufactured products.

The commission has until April 3, 2020, to make a decision on whether or not to approve the merger.