Shares in German steelmaker Salzgitter surged on Friday after Jefferies upgraded the stock to Buy, citing supportive tailwinds from European Union safeguard measures on steel imports. The stock rose as much as 4.8% in early Frankfurt trading, outperforming a broadly flat DAX index.
Jefferies analysts said the EU's extended safeguard regime, which includes tariff-rate quotas on certain steel products, is creating a more favourable pricing environment for domestic producers. The bank highlighted Salzgitter's strong exposure to the European market and its recent cost-cutting initiatives as additional catalysts. The upgrade marks a shift in sentiment for a sector that has faced headwinds from weak demand and cheap imports.
The move rippled across the European steel sector, with UK-listed peers also catching a bid. Shares in British Steel's parent company Jingye Group were not directly traded on London exchanges, but sentiment lifted stocks such as Evraz (up 1.2%) and miner Anglo American (up 0.8%) in early FTSE 100 trading. The FTSE 100 was 0.3% higher at 8,215 points by mid-morning.
The EU safeguards, initially introduced in 2018 and extended for a further period, are designed to protect domestic steelmakers from a surge in low-cost imports, particularly from Asia. The measures have been a double-edged sword for UK investors: while they support pricing for producers, they can also raise costs for downstream users in construction and manufacturing. For UK pension holders with exposure to European equities, the sector's rally offers a modest tailwind, though analysts caution that the long-term outlook depends on global demand and trade policy.
Analysts at Jefferies noted that the EU's stance on steel imports is likely to remain supportive for the foreseeable future, with a review expected later this year. However, they warned that any easing of trade restrictions or a slowdown in European industrial activity could reverse the recent gains. For now, the upgrade has provided a shot in the arm for a sector that has struggled with margin pressure and overcapacity.