Salzgitter Shares Surge After Jefferies Upgrade to 'Buy' on EU Steel Market Outlook

Shares in German steel producer Salzgitter AG (SZGG) surged on Tuesday after analysts at Jefferies upgraded the stock to 'Buy' from 'Hold'. The investment bank also raised its price target on the company by 20%, citing tailwinds from a more protectionist European Union steel market and rising prices.

Analyst Thesis

In a note to clients, Jefferies identified Salzgitter as a "key beneficiary of more protectionist EU steel quotas, higher EU steel prices and Germany’s infrastructure spending from 2027 onwards." The bank highlighted the company's significant European focus, noting that 76% of its sales are in Europe, with 42% originating in its home market of Germany.

According to the report, Salzgitter's earnings are the most leveraged to higher steel pricing among the stocks Jefferies covers. The company is also expected to benefit from improved operating rates and volumes at its mills.

Revised Financial Outlook

Jefferies lifted its 12-month price target for Salzgitter to €66 from a previous €55. The bank's updated financial model projects a significant uplift in earnings, driven by assumptions of higher steel prices and volumes.

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• 2027 EBITDA Forecast: Lifted by 12% to €1.031 billion, which is 18% above the current market consensus of €874 million.
• Steel Price Assumption: Hot rolled coil prices are forecast to rise to a range of €750 to €800 per tonne through late 2026 and 2027, compared to a current spot price of around €701.
• Earnings Sensitivity: Jefferies estimates that every €50-per-tonne increase in steel prices could add approximately €285 million to Salzgitter's EBITDA.

The analysts also see potential for Salzgitter to raise its own full-year guidance, which the company set in April at an EBITDA range of €625 million to €725 million.

Market Reaction and Context

Following the upgrade, Salzgitter's shares jumped 6.7% in early European trading. Year-to-date, the stock has gained 28%, outperforming the broader STOXX Europe 600 steel index's 15% rise.

Jefferies noted that a recent pullback in the share price, linked to a stake sale in copper producer Aurubis, presents "an opportunity to turn more constructive" on the stock.