Undervalued European Steel Exposure: Rethinking ArcelorMittal and Regional Peers in a Protectionist Era

The European steel industry is at a crossroads. Faced with a perfect storm of global overcapacity, Chinese dumping, and energy transition costs, the European Commission has deployed a blunt instrument: protectionism. By slashing import quotas and doubling tariffs on excess shipments, the EU aims to shield its domestic steelmakers from foreign competition while reviving sagging capacity utilization rates. For investors, this represents a pivotal moment to reassess exposure to a sector long battered by global imbalances-and to identify which players are best positioned to thrive in a newly fortified market.

The Protectionist Pivot: A Tailwind for Domestic Producers

The EU's proposed measures-cutting tariff-free import quotas by nearly half and imposing a 50% duty on excess shipments-have been hailed as a lifeline for struggling European steelmakers. According to a report by Reuters, the plan seeks to push capacity utilization from 67% to 80%, a threshold necessary for competitiveness in a globalized market. For ArcelorMittal, the continent's largest steelmaker, this is more than a policy shift; it's a strategic opportunity. The company's CFO, Genuino Christino, has openly stated that the firm expects to capture a significant portion of the market share vacated by reduced imports, particularly in flat steel, where imports could decline by 40%.

ArcelorMittal's optimism is grounded in hard metrics. In Q3 2025, the company reported an EBITDA per tonne of $111, 25% above its historical average. This structural improvement, coupled with a 62% stock return from June 2024 to September 2025, underscores its ability to convert policy tailwinds into financial gains. JPMorgan Chase's recent upgrade of the stock to "Overweight" further signals institutional confidence in its trajectory.

Regional Divergences: Thyssenkrupp's Struggles Highlight Structural Weaknesses

While ArcelorMittal appears to be capitalizing on the protectionist environment, its regional peers tell a different story. Thyssenkrupp, for instance, has struggled to translate policy support into consistent profitability. In Q3 2024/2025, the company reported an adjusted EBIT of €155 million-a modest improvement over the prior year but still overshadowed by a net loss of €255 million, driven by tax one-offs and impairment charges. Despite maintaining €5.7 billion in liquidity, thyssenkrupp's free cash flow remains negative, and its equity base has been eroded by a €255 million net loss.

This divergence is not merely financial but strategic. ArcelorMittal has leveraged protectionist policies to bolster its market dominance, while thyssenkrupp's focus on restructuring-such as the spin-off of its Marine Systems division-reflects a defensive posture. The European Automobile Manufacturers' Association (ACEA) has even warned that the EU's aggressive measures could backfire by inflating costs for automakers reliant on both domestic and imported steel. For thyssenkrupp, which supplies critical components to the automotive sector, this creates a precarious balancing act.

Valuation Metrics: ArcelorMittal's Premium vs. Regional Peers

The financial performance of ArcelorMittal and thyssenkrupp is mirrored in their valuation metrics. ArcelorMittal trades at a P/E ratio of 12.06, supported by a robust EBITDA margin and a strategic buyback program that has repurchased 38% of its equity over five years according to company data. Its debt profile, while elevated at $8.3 billion, is offset by $11 billion in liquidity and a disciplined approach to shareholder returns as disclosed in investor materials.

Thyssenkrupp, by contrast, lacks a comparable earnings foundation. With a negative EBIT in recent quarters and no disclosed P/E ratio, its valuation remains speculative. The company's net financial assets of €3.7 billion suggest a strong balance sheet, but without consistent profitability, this liquidity offers little comfort to investors.

Strategic Sector Rotation: A Case for European Steel Exposure

For investors seeking undervalued exposure to the European steel sector, the case for ArcelorMittal is compelling. The company's alignment with EU protectionist policies, coupled with its financial resilience and market share ambitions, positions it as a beneficiary of a structural shift. The proposed Carbon Border Adjustment Mechanism (CBAM) further enhances its competitive edge by penalizing carbon-intensive imports.

However, the broader sector remains fragmented. While ArcelorMittal thrives, regional peers like thyssenkrupp highlight the challenges of operating in a market constrained by both global overcapacity and domestic policy volatility. For now, the data suggests a clear winner in this new era of protectionism-but also a cautionary tale about the uneven distribution of its benefits.

Conclusion

The EU's steel protectionism is not a panacea, but for companies like ArcelorMittal, it represents a rare alignment of policy and market dynamics. As import quotas tighten and tariffs rise, the firm's ability to scale operations and return capital to shareholders makes it a standout in an otherwise turbulent sector. For investors, the lesson is clear: in a protectionist era, strategic sector rotation toward well-positioned European steelmakers may offer both defensive and growth-oriented rewards.