thyssenkrupp: Europe’s steel transformation is caught in a cost trap
Europe’s industry wants to produce more climate-friendly steel, but a huge funding gap remains. The European Resilience Alliance, of which thyssenkrupp is also a member, presented an action plan intended to enable investment in the hydrogen economy. Its demands include double-sided hydrogen auctions, contracts for difference for intermediaries and financing for transport networks spread over a longer period.
The issue is of considerable importance to thyssenkrupp, as the group faces a costly transformation of its steel division. The planned direct reduction plant in Duisburg is intended to replace part of conventional blast furnace production in future. For this, the company initially needs natural gas and, in the longer term, large quantities of hydrogen. Without competitive energy prices and long-term, secure supply contracts, the company faces substantial financial risks.
At the same time, thyssenkrupp is changing its group structure. With the spin-off of 49% of its stake in tk accelis, the business is to be listed independently on the stock exchange. Shareholders will receive 1 share in the new company for every 20 thyssenkrupp shares. The parent group will retain a 51% stake. The first day of trading is scheduled for October 28.
Analysts certainly see potential. Jefferies confirmed its Buy recommendation with a price target of EUR 16.50. JPMorgan raised its target from EUR 15 to EUR 17, but maintained its Neutral rating. Analyst Dominic O’Kane expects a significant improvement in earnings for European steel companies over the next two years.
Strategic Resources: 4 million tonnes for the steel industry of the future
While Europe’s steel groups discuss hydrogen prices and investments worth billions, Strategic Resources is working on a crucial prerequisite for industrial transformation: producing high-grade iron ore. The Canadian resources developer focuses on high-purity iron, vanadium and titanium. The focus is on the planned pellet plant at the BlackRock project in Québec.
At the Port of Saguenay, the company plans to build a plant with an annual capacity of 4 million tonnes. The high-grade iron ore pellets are intended for direct reduction, where hydrogen could replace coal over the long term. The site offers access to low-cost hydropower, natural gas and international transport routes. Initially, the plant is to process purchased iron ore concentrate, allowing it to operate independently of its own mining production.
A technical study from March 2024 puts the initial investment at USD 470 million and the planned construction period at 25 months. Under the modelling assumptions at the time, it calculated an after-tax project return of 25% and potential annual EBITDA of USD 173 million. However, these figures are scenario-based and depend in particular on achievable pellet prices.
There is also progress on implementation. Strategic Resources already holds a permit for a pellet plant with an annual capacity of 1.5 million tonnes. The amendment process to expand to 4 million tonnes is underway. In May, the company answered follow-up questions from the environmental authority. The company also has agreements with Javelin Global Commodities for raw material supply and marketing up to 4 million tonnes of pellets annually.
In addition, the Finnish Mustavaara project opens up new opportunities. Vanadium-bearing magnetite concentrate was selected for the EUR 17 million FutSteel research project. Hydrogen-based processes for lower-emission steel production are being investigated.
Cleveland-Cliffs: Strongest quarter in 3 years
While European steelmakers struggle with high energy costs and the costly transformation of their production, Cleveland-Cliffs is gaining strong momentum again in the US. The American steel group reported revenue of USD 5.6 billion for the third quarter of 2026. Adjusted EBITDA reached USD 612 million, significantly exceeding its own forecast of USD 575 million.
Operating earnings more than doubled compared with the previous quarter. Cleveland-Cliffs had generated adjusted EBITDA of just USD 286 million in that period. On the bottom line, it returned to profitability: a loss of USD 134 million in the second quarter was followed by a net profit of USD 165 million.
CEO Lourenco Goncalves described it as the strongest quarter in three years. Higher selling prices, rising sales volumes and falling unit costs contributed to the improved earnings. In addition, the company says it is benefiting from a US trade environment in which steel imports are well below previous levels.
For the fourth quarter, management is forecasting adjusted EBITDA of around USD 715 million. At the same time, debt is to fall further. By mid-2027, Cleveland-Cliffs aims to achieve a net debt-to-EBITDA ratio of less than 2.5.
Analysts also responded to the improved prospects. B. Riley raised its price target from USD 15 to USD 18 and confirmed its Buy rating. Wells Fargo rates the stock Overweight with a price target of USD 17. JPMorgan and Barclays remain more cautious, with price targets of USD 13 and USD 12 respectively.
Conclusion
thyssenkrupp must prove that its steel-production transformation is financially viable. With strong earnings improvement, Cleveland-Cliffs shows the profit potential that more favourable market conditions can unlock. Strategic Resources operates earlier in the value chain. With high-purity iron ore pellets and vanadium projects, the company aims to provide raw materials for modern steelmaking processes.
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