Jefferies Spotlights Europe's Top Steel Stocks as Prices Set to Rebound in 2026

Jefferies has zeroed in on a handful of European steelmakers poised to gain traction amid a tightening steel market next year. The firm's December outlook highlights Salzgitter (ETR: SZG), Thyssenkrupp (ETR: TKA), ArcelorMittal (NYSE: MT), and several stainless steel producers as prime beneficiaries of shifting policies designed to curb imports and squeeze supply, ultimately shoving prices higher.

Europe's steel sector is gearing up for tighter import quotas, heftier tariffs, and the rollout of the Carbon Border Adjustment Mechanism (CBAM). Jefferies expects these moves to throttle imported steel and promote domestic production, potentially pushing operating rates from the current mid-60% range toward the mid-80s. This supply squeeze could breathe life into hot-rolled coil prices after a sluggish period.

ArcelorMittal stands out as particularly sensitive to steel price swings. The brokerage estimates every €50-per-tonne uptick in prices could boost ArcelorMittal's EBITDA by around $1.6 billion, a hefty 20% jump. Volume increases also offer upside; a 5% rise in shipments could lift earnings by approximately 7%. Investors have been warming up to ArcelorMittal, especially with Moody's moving its long-term issuer rating up to Baa2 and ongoing talks with Polish authorities about its operations there.

Salzgitter is next on Jefferies' list, thanks to its low current utilization rates and European flat steel mix giving it ample room to run if prices rebound as expected. However, analyst opinions on Salzgitter are mixed. JPMorgan recently downgraded it to Underweight while BNP Paribas Exane upgraded it to Outperform. Adding to the intrigue, major stakeholder GP Papenburg is reportedly selling off its entire stake.

Not to be overlooked, Thyssenkrupp also shows compelling upside in Jefferies' models. While its conglomerate structure adds some complexity to earnings forecasts, a €50 price increase translates into robust earnings growth potential. The recent spin-off of Thyssenkrupp's Marine Systems unit and movements around its Elevator business hint at ongoing corporate reshaping that could unlock further value.

Among stainless steel producers, Outokumpu (HEL: OUT1V) catches the eye. Jefferies points to a potential 46% valuation upside based on mid-cycle earnings, fueled by favorable CBAM impacts, tighter import controls, and rising U.S. stainless steel prices. Still, recent chatter includes a downgrade by Deutsche Bank, citing cautious Q4 guidance.

Aperam (EBR: APAM) and Acerinox (MC: AKN) round out the list of stainless players expected to ride the policy winds improving Europe's steel market dynamics. Both companies' prospects link closely to CBAM implementation and declining import penetration, though Jefferies stops short of calling an immediate turnaround before 2026.

The broader European steel sector has already seen a strong re-rating, with carbon steel stocks jumping between 50% to 200% this year. Yet, Jefferies argues some firms retain upside if pricing gains and volume recoveries play out as quotas tighten-potentially slashing import share from around 25% to near 15%. A bump of over 10 million tonnes in domestic output might push operating rates toward the lucrative 80%-85% band.

That said, the steel industry remains in flux. Quota cuts, tariffs, and new environmental regulations bring uncertainty alongside optimism. The question lingers: Will these policy tools sustain a lasting price recovery, or will unforeseen headwinds trip up the sector's bounce-back?