Steel Industry in Transition! Strategic Resources, thyssenkrupp and Salzgitter Offer New Opportunities

Strategic Resources: Two Irons in the Fire

Strategic Resources develops projects for high-purity iron, vanadium, and titanium. The focus is on the flagship BlackRock project in the Canadian province of Québec. The Canadian company is also active in Finland with the historic Mustavaara vanadium project.

Vanadium significantly increases the strength of steel and plays a major role in the construction industry, vehicle manufacturing, and tool manufacturing. The raw material is also used in vanadium redox flow batteries for stationary energy storage. Titanium combines several advantageous properties: Its strength, light weight, and high corrosion resistance make it essential for the aerospace, defence and medical technology industries.

The Canadian company plans to scale up its independent pellet plant at the Port of Saguenay, located about 200 km north of Québec City, to an annual production capacity of 4 million metric tonnes. The permitting process is underway. However, extraction from BlackRock's own deposit is not necessary in the short term, as Strategic Resources initially plans to process purchased iron ore concentrate.

This means value creation and value-added processing take centre stage. Fine concentrate is transformed into solid pellets, which serve as a high-quality feedstock for the rest of the production chain. The pellets are suitable for direct reduction. In this process, oxygen is removed from iron ore without melting it. By using green hydrogen, green steel can be produced during this process. The Canadian company is partnering with Javelin Global Commodities as its procurement and marketing partner.

A feasibility study published in March 2024 indicated high profitability, with a project value of a remarkable CAD 1.93 billion and an internal rate of return of 18.2%. In contrast, at the current share price of CAD 0.22, the company's market capitalization stands at only CAD 13 million.

Additional potential stems from the company's activities in Finland. This summer, the company announced that it would supply concentrate from Mustavaara for the EUR 17 million FutSteel research project. The University of Oulu, together with industry partners, is investigating the further development of electric and hydrogen-based steel production. The research also focuses on evaluating vanadium's suitability under demanding conditions.

thyssenkrupp: Restructuring Moves Forward

At thyssenkrupp, a different task is taking centre stage. The diversified industrial group aims to make its businesses more efficient and independent. For Steel Europe, becoming an independent entity remains the goal as well, with the parent company retaining only a minority stake if necessary. The sale of the HKM shares to Salzgitter was completed in July.

As a lean financial holding company, however, the group generally intends to retain majority stakes in the independent companies. Spinning off the operating divisions is intended to shorten decision-making processes, reduce administrative costs, and make the value of the individual businesses more visible on the capital market, thereby boosting their share prices.

The spin-off and IPO of the marine division TKMS marked an important first step. Next, the former materials trading and services business Materials Services is set to go public under the name tk accelis. The listing is scheduled for fall 2026.

These developments are also gradually reflected in the financial figures. In August, the Group raised the lower end of its forecast for adjusted EBIT from EUR 500 to 600 million. At a current share price of EUR 15, the company is valued at EUR 9.3 billion. The shares have gained over 60% since the beginning of the year. Analysts nevertheless believe the stock has further, albeit moderate, upside potential.

Salzgitter: Low-CO₂ Production Gains Importance

Salzgitter combines steel production and processing with trading and technology. "Salzgitter Low CO₂ Steelmaking" (SALCOS) plays a strategic role. This initiative involves a gradual transition from coal-fired blast furnaces to direct reduction plants and electric arc furnaces.

The restructuring is also taking shape at the acquired HKM. Salzgitter recently announced the permanent shutdown of Blast Furnace A. Starting in 2029, an electric arc furnace with an annual capacity of up to 2.5 million metric tons is scheduled to begin production there. While this modernization opens up long-term opportunities for lower-emission production, it initially requires significant investment.

In the first half of the year, Salzgitter generated an operating result (EBITDA) of EUR 459 million before valuation effects related to the Aurubis exchangeable bond. However, the Aurubis investment positively skewed the result by EUR 193 million. Going forward, the Group's earnings quality will continue to depend on Aurubis as well, and not solely on the steel business. For the full year, the Group forecasts adjusted EBITDA of between EUR 725 million and EUR 825 million.

Competitive energy prices and customers' willingness to pay for low-carbon steel will be decisive factors going forward. Analysts expect the stock to have an average upside of around 30% over the next 12 months.

The steel industry's transformation is creating opportunities across the value chain. With its planned pellet plant, Strategic Resources is addressing the need for high-quality feedstocks in modern production processes. Actual production cuts in China could ease price pressure and give the industry additional breathing room. At thyssenkrupp, progress on restructuring and the reorganization of the group will determine how much value is created for shareholders. Salzgitter is driving technological change but must translate its high investments into sustainably competitive production. The stake in Aurubis remains a key value driver.