Steyr Motors After the Sell-Off: Buy the Dip? TKMS Rides the Defense Boom — Strategic Resources Set to Benefit From Soaring Steel Demand

TKMS Needs Robust Steel Supply Chains for Submarines and Frigates

The global defense boom is filling order books not only for manufacturers of tanks, missiles, and drones. Demand is also growing in the naval sector, and with it, the need for raw materials. One example is TKMS. The German naval shipbuilder is positioning itself for the multi-billion-dollar Canadian Patrol Submarine Project (CPSP) and aims to generate as much value-added as possible in Canada. To this end, TKMS signed a cooperation agreement in April 2026 with Finkl Steel – Sorel, a company of the Swiss Steel Group. Together, they will explore how the specialty stainless steel required for modern submarines can be smelted and produced in Canada in the future.

The focus is on grade 1.3964 stainless steel, which is intended for use in modern submarine platforms. The requirements for the material are correspondingly high. Finkl Steel – Sorel will therefore examine how the company can qualify to produce this specialty steel in accordance with international naval standards. These include, among other things, technical specifications from the Bundeswehr Research Institute for Materials, Fuels and Lubricants (WIWeB), the classification society DNV, and the relevant construction regulations for naval vessels. The collaboration underscores that the expansion of the Western defense industry requires not only additional shipyard capacity but also resilient supply chains for high-quality, certified steel products.

As a result, the defense industry's demand for steel is likely to become an even greater focus in the coming years. TKMS and Finkl Steel intend not only to exchange technical information on dimensions, chemical composition, and certification requirements, but also to explore opportunities for long-term industrial participation in the Canadian submarine program. The supply of strategic materials from reliable supply chains is crucial in this context. It is precisely this development that makes it clear that not only the well-known defense conglomerates could benefit from the European and North American defense boom, but also companies along the upstream steel and raw materials value chain.

Strategic Resources Prepares for Steel Boom

This is where Strategic Resources becomes interesting. The raw materials company operates in Canada and Northern Europe, of all places, and thus in the two regions that also play a central role in the latest TKMS megaproject. The TKMS project is intended not only to strengthen Canada's defense capabilities but also, explicitly, to create long-term industrial value and resilient supply chains within the country.

This is exactly where Strategic Resources fits into the picture. There is currently no direct supply relationship between Strategic Resources and TKMS. Nevertheless, the company fits well into the bigger picture of the steel and commodities industries as they undergo realignment. The company is developing the BlackRock project in Québec, Canada, as well as building a potential production facility for high-quality iron ore pellets at Port Saguenay. The initial planned capacity is approximately 4 million metric tonnes per year. The plan is to produce so-called direct-reduction-grade pellets, which are particularly well-suited for lower-emission steel production. The location offers access to affordable hydropower, natural gas, and, via the port, international markets. At the same time, Strategic Resources is moving forward with the permitting process for the larger pellet plant.

Strategic Resources' second strategic pillar is located in Finland. There, the company is developing the Mustavaara project, a vanadium-iron ore deposit, with the goal of extracting vanadium and iron-containing products. The project is gaining importance, particularly in light of the rising demand for domestic or allied sources of raw materials for steel and industrial production.

And it is not just submarines. The expansion of defense capabilities, such as through new frigate programs, will increase the long-term demand for high-quality steel products. At the same time, steel companies like thyssenkrupp are investing billions in the transition to lower-carbon production. This requires high-quality iron ore pellets, which Strategic Resources intends to supply in the future.

And what about Strategic Resources stock? Given the planned production capacities and the strategic importance of the projects, the current valuation does not appear ambitious so far. Should Strategic Resources make further progress in project development, the capital market could value the company significantly higher.

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Steyr Motors: Buy After the Sell-Off?

While TKMS is currently riding a wave of success and Strategic Resources stands to benefit from the growing demand for low-carbon steel, Steyr Motors is struggling with weak half-year results, order delays, and disappointment over a failed takeover. As a result, the share has plummeted from EUR 41 to nearly EUR 25 since the end of July. A rebound has, however, pushed the price back above EUR 28.

NuWays nevertheless recommends the stock as a "Buy" in its research update. Analysts attribute the weak first half of the year and the lowered forecast for the specialty engine supplier primarily to delayed call-offs in the defense business. In the second quarter, revenue stood at EUR 11.1 million, down 4.5% from the prior-year figure, despite the new subsidiary BUKH contributing EUR 1.9 million. While civilian revenue rose by 39% in the first half of the year, defense revenue fell by 30% due to delayed contracts. Adjusted EBIT for the second quarter was EUR -0.8 million, compared with approximately EUR 1.3 million in the prior year. The full-year forecast has been lowered, as the postponed volumes are not expected to be fully recovered in the second half of the year. However, NuWays sees no indications so far that orders have been lost and therefore continues to anticipate a recovery in the second half of the year.

NuWays sees several potential growth drivers for 2027. These include programs at Urovesa and KNDS, as well as the unmanned watercraft sector, as well as potential additional orders for the M12 power unit. In the civilian business, a potential Siemens locomotive order for Finland and the ramp-up of the Shangyan joint venture, among other things, could also contribute. In addition, NuWays points to ongoing takeover speculation; although Red Cat has withdrawn its non-binding proposal, analysts believe Steyr Motors remains strategically attractive. Against this backdrop, NuWays reaffirms its "Buy" recommendation and lowers the price target from EUR 53 to EUR 49.

There is currently no direct supply relationship between Strategic Resources and TKMS. Nevertheless, the strategic parallel is noteworthy. TKMS is establishing local supply chains for critical materials for its Canadian submarine project and has already entered into agreements with Canadian steel and raw materials companies. Strategic Resources is positioning itself at the beginning of this industrial value chain. In addition to Canada, the company is also represented in Northern Europe through its Finnish project. As a result, Strategic Resources could benefit from the growing desire of Western countries and companies to source strategic raw materials and steel products from their own or allied supply chains. The sell-off at Steyr Motors appears to be excessive. However, this development shows that large defense projects pose risks, particularly for small and medium-sized enterprises.