Thyssenkrupp Pauses Jindal Steel Deal to Pursue Internal Growth

Thyssenkrupp AG has paused acquisition talks with Jindal Steel International for its steel division. The German company is shifting its strategy, aiming to boost its steel business through internal improvements and a more supportive European regulatory environment. Thyssenkrupp appears to be betting that changing policies and its own restructuring efforts will lead to better prospects than selling the unit now. This pause means the company is reassessing the steel business's value and future potential, influenced by recent policy news and its own progress in making operations more competitive.

Key Drivers: EU Rules and Internal Changes

A key reason for Thyssenkrupp's decision is the changing regulatory landscape in Europe. New EU measures, effective July 2026, will impose lower import quotas and a 50% customs duty on steel. These rules aim to address global overcapacity and support European steel producers. Along with the Carbon Border Adjustment Mechanism (CBAM), these policies are expected to reshape competition for European steel companies. Thyssenkrupp likely sees these changes creating a more stable and profitable operating environment, making its restructuring efforts more effective and boosting the steel unit's long-term value. However, high energy prices in Europe continue to be a significant challenge for industrial competitiveness.

Thyssenkrupp also highlighted its progress in restructuring its steel operations. The company has cut staff and reduced capacity to boost competitiveness. Although sales fell in fiscal year 2024/2025, Thyssenkrupp reported better adjusted operating profit (EBIT), partly due to efficiency gains and special items. The steel division moved from an operating loss to a profit, helped by selling some assets. This internal improvement, combined with expected policy support, has changed Thyssenkrupp's view, making it less eager to sell to Jindal Steel on the original terms. Meanwhile, Jindal Steel has been growing its own capacity, reaching 15.6 million tonnes per year, which may lead it to adjust its global expansion plans.

The halt in negotiations also points to a gap in how the companies value the steel division and the deal's rising complexity. Talks reportedly faltered over disagreements on pension liabilities, estimated at $2.8 billion, and the costs for modernizing and developing green steel. Thyssenkrupp's price-to-earnings (P/E) ratio was negative (-11.1) as of April 2026, reflecting losses and restructuring. The company expects a net loss of up to €800 million for fiscal year 2025/2026, with a market capitalization around €6.30 billion. Jindal Steel's stock has gained over 36% in the last year and holds a 'Buy' rating with a price target near INR 1,213.07. This difference in valuation, along with increasing deal costs, likely led to the talks stopping.

Skepticism Over Outlook

Despite Thyssenkrupp's optimism about the EU's regulatory changes, some skepticism remains. The new EU steel protection measures take full effect in July 2026, leaving a period of uncertainty. There is also a risk that these measures could lead to trade retaliation from other countries, complicating international sales. High energy costs in Europe continue to be a major drawback, making it hard for local producers to compete with regions that have lower energy prices, especially as the move towards green steel increases power consumption. Thyssenkrupp's steel division has a history of losses, reporting €600 million in the last fiscal year. Restructuring costs are expected to be significant, potentially running into hundreds of millions of euros. The large pension liabilities are a major financial burden that could hinder future sales or recovery efforts. Thyssenkrupp's stock has been volatile; an investor from 2014 would have seen a negative return. The stock's rise of 35.33% in the past year leading up to April 2026 might have encouraged management to aim for higher valuations, perhaps overestimating the immediate effects of regulatory changes and internal turnarounds. The breakdown of this deal could also signal wider difficulties in consolidating Europe's steel industry, which faces issues like global overcapacity and trade disputes.

Future Plans

Thyssenkrupp plans to continue transforming its operations to make the steel division more competitive, relying on restructuring and expected EU policy support. The company forecasts sales to decline by 2% to grow by 1% in fiscal year 2025/2026, with adjusted operating profit (EBIT) between €500 million and €900 million. However, restructuring costs are expected to result in a net loss. Analysts have a mixed view, with a consensus 'Hold' rating for Thyssenkrupp AG and an average 12-month price target of €11.07. For Jindal Steel, this pause requires rethinking its international acquisition strategy. Its domestic growth and strong finances, however, suggest continued momentum. The future of the European steel sector depends on how effectively new trade policies are enacted, if energy costs decrease, and if decarbonization efforts succeed, all of which carry significant uncertainty.