Jefferies maintains its buy recommendation on Thyssenkrupp with a target price of 13 euros. Despite macroeconomic uncertainty and increasing risks surrounding the sale of Steel Europe, the steel branch of the German metallurgy group, Jefferies remains optimistic about the structural improvement of the steel fundamentals in Europe. However, the crisis in the Middle East is delaying the recovery.
As a result, Jefferies lowers the adjusted EBIT estimate for 2026 by 2% to 830 million euros, reflecting the heightened macroeconomic uncertainty due to the Middle East conflict. While energy prices have risen, the short-term cost impact remains limited, supported by hedging strategies and tariff compensations. Jefferies’ base scenario assumes that the conflict will not prolong, but the high uncertainty is sufficient to delay the profit recovery.
The broker emphasizes that investor sentiment regarding the sale of Thyssenkrupp Steel Europe has deteriorated further, with negotiations with Jindal Steel International appearing to be at a standstill. Despite operational and strategic milestones achieved, such as the exit of HKM, a union agreement, and production capacity adjustments, improvements in asset competitiveness have been noted.
Thyssenkrupp continues to advance the DRI project in Duisburg, a long-term decarbonization strategy highlighting strategic options. In 2026, Thyssenkrupp Steel Europe is expected to incur restructuring costs of hundreds of millions of euros and absorb a significant portion of the group’s investments and pension obligations, putting short-term cash flow under pressure.
The resurgence of conflict with Iran has reintroduced volatility in gas and electricity prices, impacting investor confidence. Jefferies notes that energy costs typically account for 5 to 10% of steel sales costs in Europe, implying a relatively contained direct negative impact on EBITDA.
On the contrary, the steel price remains a key driver, with every 50 euro/tonne increase in European steel prices leading to a 25-30% rise in Steel Europe’s EBITDA, offsetting cost volatility.
