Thyssenkrupp TK Stahl: "Millstone" or "Hidden Gem"?

Research evidence excerpt

Thyssenkrupp TK Stahl: "Millstone" or "Hidden Gem"?

• Remaining employees in the business have agreed to a 10% cut in salaries.

• Decarbonization capex, Phase I = c. EUR3 bn, EUR 2 bn paid by government. The

project started in 2023, we estimate c. EUR400-500 mn still to spend for TKA,

“from here”.

• Current sustaining capex in steel business c. EUR400-500 mn. We think this could

decrease slightly as the DRI plants comes online and another older blast furnace is

shut down.

Bull Bear “debate” for steel

In our view, the appropriate framework is not “good asset vs bad asset”, but rather

whether temporary policy and market support can outweigh the drag from legacy

liabilities and transformation capex long enough for the underlying franchise to re-rate.

Exhibit 4: Summary of Bull & Bear Arguments

We consider near term positives for TKA’s steel business vs. (known) longer term challenges

Bull case Bear case

The conventional BF-BOF route remains carbon intensive and high cost in a German

TRQ tailwind from 1 July 2026 should tighten the EU market and improve realised prices/spreads.

power/energy system.

High operating leverage means relatively modest spread improvement can drive a meaningful tkH2Steel phase 1 alone is c.EUR3bn gross; full conversion is likely far larger and spread

EBITDA uplift. over many years.

Up to c.11,000 job reductions and site closures create material execution risk and

The Duisburg asset base retains scarcity value in coated and automotive flat steel.

restructuring cash costs.

The first DRI step is state supported, reducing near-term downside and preserving the option on

Pensions are a major hidden anchor on equity value and on strategic optionality.

“green steel” premiums.

Hydrogen economics and infrastructure remain weak, raising the risk that green