Deutsche Bank | In recent years, steel stocks have been affected by weak demand, import pressure and political headwinds, and although fiscal spending and interest rates could provide support, we remain cautious on demand. However, the European Commission’s (EC) plans to significantly strengthen trade protection point to a significant shift towards a more steel-friendly industrial policy. If these measures are implemented, even partially, steelmakers are likely to return to an environment of higher structural profitability and lower risk. This makes the sector potentially more attractive and puts it in the same position as cement and defence were a few years ago, with the potential for valuations to return to mid-cycle levels compared to the multiple deflation seen over the last eight years. We therefore remain optimistic about the sector, and our main picks are Voestalpine, ArcelorMittal, Aperam and Acerinox.
Recommendation and changes in target price: Acerinox- Buy, from €14 to €16, Aperam-Buy, from €37 to €42, ArcelorMittal – Buy, between €38 and €42, ArcelorMittal – Buy, between $44 and $49, Outokumpu – Hold, between €3.6 and €4.1, SSAB – Hold, between 55 and 60 Swedish kronor, Salzgitter – Hold or buy, between €27 and €40, Voestalpine – Buy, between €41 and €44.
