European Steelmakers Navigate Trade Storms Amid Earnings Resilience

The European steel industry has weathered turbulent trade headwinds and pricing pressures in the first quarter of 2025, delivering mixed but resilient earnings. While companies like ArcelorMittal, SSAB, and Aperam exceeded or matched expectations, their outlooks are clouded by escalating global trade disputes, Chinese overcapacity, and energy cost volatility.

Earnings Resilience Masks Lingering Risks

Despite quarterly wins, executives emphasized that trade disruptions and pricing instability threaten future growth. ArcelorMittal, the world’s largest steelmaker, reported a smaller-than-expected drop in core profits but warned that U.S.-China trade tensions and Chinese overcapacity are eroding demand forecasts. CEO Aditya Mittal noted, “Global trade uncertainty is harming business confidence and could cause further economic disruption.”

ArcelorMittal’s shares fell 5% on its Q1 results, reflecting investor skepticism about its ability to navigate these risks. Meanwhile, SSAB’s Q1 operating profit dropped 57% to SEK 1.35 billion, driven by weaker North American prices. Yet the Swedish firm highlighted a rebound in U.S. heavy plate prices and secured SEK 23.4 billion in financing for low-carbon projects, signaling long-term bets on sustainability.

Sector-Specific Challenges

Trade barriers and tariffs are reshaping regional dynamics. In Europe, the EU’s Steel and Metals Action Plan and trade restrictions have stabilized margins, while Germany’s infrastructure spending offers a tailwind. However, the OECD warns that Chinese steel exports—often priced below European production costs—are exacerbating global overcapacity.

Aperam, a Luxembourg-based specialty steelmaker, outperformed expectations with higher European sales but cautioned about pricing pressures in Q2. CEO Timoteo Di Maulo acknowledged that “reliable annual projections are challenging” due to market volatility. Meanwhile, peers like Outokumpu and Acerinox face scrutiny as they report Q1 results on May 8, with analysts bracing for more trade-related gloom.

Analyst View: Short-Term Pain, Long-Term Hope

Analysts see a glimmer of hope in Q2, with Oddo-BHF’s Maxime Kogge predicting marginal price improvements as European firms reduce reliance on Chinese imports. However, risks remain: U.S. tariffs continue to disrupt supply chains, and energy costs—already high in Europe—could worsen if geopolitical tensions rise.

The European Steel Manufacturers Industry Report underscores a fragmented landscape: while some firms achieve sales growth, others struggle with declining profitability. Investors are advised to prioritize companies with strong balance sheets and exposure to regions insulated by trade barriers, such as India, where ArcelorMittal benefits from a 12% safeguard duty on Chinese steel.

Conclusion: Navigating the Steel Gauntlet

European steelmakers are proving resilient in the face of macroeconomic headwinds, but their path to sustained profitability is fraught. Key data points highlight the challenges:
- Overcapacity: China’s steel output exceeds global demand by ~20%, per OECD estimates.
- Trade Costs: U.S. tariffs have cut European steel exports to America by 15% since 2023.
- Investment: SSAB’s SEK 23.4 billion financing underscores the capital required to modernize and decarbonize.

Investors should focus on companies with geographic diversification (e.g., Aperam’s Brazil exposure) and low-carbon initiatives (SSAB’s Luleå project). While Q1 earnings were a win, the sector’s survival hinges on resolving trade conflicts and curbing Chinese overcapacity—a tall order in 2025.

In short, European steel stocks offer value for the bold, but patience and selective picking will be essential to weather the storm.