BMO named Fastmarkets Award for Steel Excellence 2022 – Financial Services Provider of the Year
August 16, 2022
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Metals
- Keywords:
- asset based lending
As an international lender and provider of financial services to the steel sector, BMO has a dedicated team to address the needs of the steel and metal industries and lend directly to them.
“I think what differentiates us in the steel sector from others is that we do have a very specific specialized team that is focused on working with companies through the whole metals value chain – from raw materials and production to distribution and fabrication – and we have a significant team that focus on working with, and helping customers in, the metals and steel sector,” said the team’s leader, Andrew Pappas, Head of the ABL Metals Group at BMO Commercial Bank, headquartered in Chicago.
It is a differentiation that has helped BMO win the accolade of Financial Services Provider of the Year for the third time in the Fastmarkets Awards for Steel Excellence Program.
BMO started its dedicated team about 10 years ago and its work has grown tremendously, said Pappas. “A lot of our growth has come from our customers, and so I think that is a truly differentiating aspect. And in a dynamic industry like the steel industry, you need to be able to respond quickly and handle customer requests. It is the whole metals team that has won this award,” he observed.
Vertical integration
Pappas highlighted that the steel sector continues to vertically integrate, and that is happening across the value chain from raw materials to producers, distributors and fabricators. “People are getting into different sectors along the value chain, making it a little more complicated for traditional lenders,” he noted.
He said that BMO recognized that it needed to have educated bankers on its team, able to work with customers and companies as changes occur in the steel sector. “We need to be able to adapt and move quickly. So, there are both challenges and opportunities and we’re excited to be supportive and to help provide solutions,” he added.
The bank offers a wide range of financial products and services to the steel industry, but which would Pappas mark out as being the most recent innovations?
He chose sustainable finance as a key example: “BMO Financial Group has committed $300 million for underwritings that will help companies move towards a zero-carbon environment through 2025.” Sustainable finance requires bank deals or bond financing, Pappas noted.
“Our Metals Sales & Structuring group provides everything from repo [repurchase] facilities to lease lines and OTC hedging – they have been in the forefront and have been very aggressive in helping BMO’s clients to manage exposure to price volatility, finance metals inventory more efficiently, improve supply chain management and achieve better balance sheet ratios”, he explained.
He added that some of the best “innovations” might be thought of as minor activities, or simply fundamentals, “but listening to your customers and understanding what’s happening in their business and being able to modify the debt relationship, or credit facility, and making tweaks to the deal to help customers move their inventory quicker, finance product that is moving around the world… You cannot really describe that as a major category, but I would say responsiveness and listening to your customer and being able to tweak your deal with your customer to make sure it works for them.” Those factors are very important in the long-term relationship between BMO and its steel and metals customers, he stressed.
Providing such flexible and responsive services requires a good nderstanding of the steel market and outlook. Pappas acknowledged that the general macroeconomic outlook has multiple uncertainties at present, but he noted that strong recovery from the Covid-19 pandemic in the US, particularly in the construction and oil & gas sectors, has enabled many steelmakers in the country to see their best financial results within the past ten years in 2021.
“For some of our customers, with a tight labor supply, they haven’t even been able to meet some of that growth themselves… So any kind of slowdown that may occur related to external factors, such as inflation or rising interest rates, will affect them, but they will be able to weather the storm, like past corrections,” Pappas added.
“A lot of those companies have recognized that prices will eventually decline to more historic levels, and have been right-sizing, managing their inventory levels and tying their purchases to customer orders, or on a back to back basis. From BMO’s perspective, we are going to continue to grow and continue to support growth for these companies, so while metal prices were rising, we were stepping up and doing what we could to finance their working capital needs,” he explained.
Outlook
“Obviously external forces are creating more volatility in commodity markets. Prices are declining now, there are ups and downs, but a lot of our customers have had such an excellent run over the last couple of years – better capitalized, in a position where they can withstand any downturns – and we’re just going to continue to work with them.”
“So, right now the demand outlook looks slower, no doubt. But I would add that the whole greenification and electrification trends will continue and, short of any significant pull-back, I think that will create better demand for certain metals in the metals chain, and I think a lot of companies are really adjusting for those potential changes which are inevitable,” he added.
“It is a dynamic industry and bankers need to continue to adjust and change and do things that are necessary to enable our customers to successfully manage and run their businesses,” he concluded.
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As an international lender and provider of financial services to the steel sector, BMO has a dedicated team to address the needs of the steel and metal industries and lend directly to them.
“I think what differentiates us in the steel sector from others is that we do have a very specific specialized team that is focused on working with companies through the whole metals value chain – from raw materials and production to distribution and fabrication – and we have a significant team that focus on working with, and helping customers in, the metals and steel sector,” said the team’s leader, Andrew Pappas, Head of the ABL Metals Group at BMO Commercial Bank, headquartered in Chicago.
It is a differentiation that has helped BMO win the accolade of Financial Services Provider of the Year for the third time in the Fastmarkets Awards for Steel Excellence Program.
BMO started its dedicated team about 10 years ago and its work has grown tremendously, said Pappas. “A lot of our growth has come from our customers, and so I think that is a truly differentiating aspect. And in a dynamic industry like the steel industry, you need to be able to respond quickly and handle customer requests. It is the whole metals team that has won this award,” he observed.
Vertical integration
Pappas highlighted that the steel sector continues to vertically integrate, and that is happening across the value chain from raw materials to producers, distributors and fabricators. “People are getting into different sectors along the value chain, making it a little more complicated for traditional lenders,” he noted.
He said that BMO recognized that it needed to have educated bankers on its team, able to work with customers and companies as changes occur in the steel sector. “We need to be able to adapt and move quickly. So, there are both challenges and opportunities and we’re excited to be supportive and to help provide solutions,” he added.
The bank offers a wide range of financial products and services to the steel industry, but which would Pappas mark out as being the most recent innovations?
He chose sustainable finance as a key example: “BMO Financial Group has committed $300 million for underwritings that will help companies move towards a zero-carbon environment through 2025.” Sustainable finance requires bank deals or bond financing, Pappas noted.
“Our Metals Sales & Structuring group provides everything from repo [repurchase] facilities to lease lines and OTC hedging – they have been in the forefront and have been very aggressive in helping BMO’s clients to manage exposure to price volatility, finance metals inventory more efficiently, improve supply chain management and achieve better balance sheet ratios”, he explained.
He added that some of the best “innovations” might be thought of as minor activities, or simply fundamentals, “but listening to your customers and understanding what’s happening in their business and being able to modify the debt relationship, or credit facility, and making tweaks to the deal to help customers move their inventory quicker, finance product that is moving around the world… You cannot really describe that as a major category, but I would say responsiveness and listening to your customer and being able to tweak your deal with your customer to make sure it works for them.” Those factors are very important in the long-term relationship between BMO and its steel and metals customers, he stressed.
Providing such flexible and responsive services requires a good nderstanding of the steel market and outlook. Pappas acknowledged that the general macroeconomic outlook has multiple uncertainties at present, but he noted that strong recovery from the Covid-19 pandemic in the US, particularly in the construction and oil & gas sectors, has enabled many steelmakers in the country to see their best financial results within the past ten years in 2021.
“For some of our customers, with a tight labor supply, they haven’t even been able to meet some of that growth themselves… So any kind of slowdown that may occur related to external factors, such as inflation or rising interest rates, will affect them, but they will be able to weather the storm, like past corrections,” Pappas added.
“A lot of those companies have recognized that prices will eventually decline to more historic levels, and have been right-sizing, managing their inventory levels and tying their purchases to customer orders, or on a back to back basis. From BMO’s perspective, we are going to continue to grow and continue to support growth for these companies, so while metal prices were rising, we were stepping up and doing what we could to finance their working capital needs,” he explained.
Outlook
“Obviously external forces are creating more volatility in commodity markets. Prices are declining now, there are ups and downs, but a lot of our customers have had such an excellent run over the last couple of years – better capitalized, in a position where they can withstand any downturns – and we’re just going to continue to work with them.”
“So, right now the demand outlook looks slower, no doubt. But I would add that the whole greenification and electrification trends will continue and, short of any significant pull-back, I think that will create better demand for certain metals in the metals chain, and I think a lot of companies are really adjusting for those potential changes which are inevitable,” he added.
“It is a dynamic industry and bankers need to continue to adjust and change and do things that are necessary to enable our customers to successfully manage and run their businesses,” he concluded.
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