Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **European Steel Industry**, highlighting significant policy shifts and market dynamics as of October 2025 [6][7][8]. Core Insights and Arguments - **Policy Changes**: The EU's proposal to halve import quotas and double safeguard duties to 50% indicates a strong protectionist stance, which may lead to additional policy tailwinds from the upcoming CBAM review [6][7]. - **Market Conditions**: Hot-rolled coil (HRC) price gains are primarily policy-driven, while end-user consumption remains weak in construction and manufacturing sectors [6][7]. - **Carbon Steel Outlook**: - **Bull Case**: Preference for voestalpine due to local-for-local strategy, superior margins, and exposure to Railway Systems, which provides earnings resilience [7]. - **ArcelorMittal** is noted for its operating leverage to policy tightening, with lower utilization rates allowing for volume growth and import displacement [7]. - **Least Preferred**: Salzgitter and thyssenkrupp due to cash burn and execution risks [7]. - **Stainless Steel Market**: - Anticipated gradual repricing due to policy tightening and CBAM rollout, expected to reduce import penetration by approximately 20% [8]. - **Preferred Companies**: Acerinox for its U.S. footprint and high-alloy mix, and Aperam for its diversified business model [8][10]. - **Least Preferred**: Outokumpu due to lack of exposure beyond stainless steel [8]. Financial Performance and Valuation - **ArcelorMittal**: Despite a strong long-term investment case, the recent share re-rating is misaligned with earnings impacts from potential Ukraine rebuild, leading to a more balanced risk-reward profile [9]. - **voestalpine**: Maintains resilient EBITDA/t during downturns, with manageable decarbonization investments minimizing free cash flow burn [9]. - **thyssenkrupp**: Shares have doubled year-to-date, but the valuation appears to be at a 20-30% premium to its sum-of-the-parts (SotP) valuation, indicating execution risks [9]. - **Salzgitter**: Expected cash burn to intensify due to decarbonization spending, with current valuation levels not providing sufficient margin of safety [9]. Demand Drivers - Key demand drivers for steel include **construction** and **automotive** sectors, with significant contributions from building and infrastructure [20][21]. - **Automotive Demand**: New vehicle registrations in Western Europe and the U.S. are critical indicators of steel demand, with trends showing fluctuations in production and registrations [27][28][29]. Supply Dynamics - **Global Steel Production**: The center of gravity for steel production is shifting towards Asia, with significant contributions from China [18]. - **EU and U.S. Production**: Annualized steel production in the EU and U.S. is monitored, with trends indicating varying levels of output [65][66]. Trade Flows and Import Dynamics - **EU Steel Imports**: The report details the import quotas and utilization rates for various countries, highlighting Turkey, India, and South Korea as significant contributors [88][89]. - **Stainless Steel Trade**: The report outlines the trade flows for stainless steel, with India and Taiwan being major import sources for the EU [90][91]. Additional Insights - **Market Sentiment**: The overall sentiment in the steel market is cautious, with a focus on balancing supply and demand amid changing policy landscapes and economic conditions [6][7][8]. - **Investment Recommendations**: Analysts recommend a selective approach to investments in the steel sector, favoring companies with strong fundamentals and strategic positioning [7][9][10]. This summary encapsulates the critical aspects of the conference call, providing a comprehensive overview of the European steel industry's current state and future outlook.

Group 1: Dollar Index and Trade Relations - The dollar index (DXY00) is up by +0.32% due to the Trump administration signaling openness to a trade deal with China, which eases trade tensions [1] - The ongoing US government shutdown is bearish for the dollar, as prolonged shutdowns could negatively impact the US economy [1][2] Group 2: Euro and Political Uncertainty - The EUR/USD is down by -0.46% as the euro faces pressure from a stronger dollar and political uncertainty in France [3] - President Macron's announcement of a new cabinet has temporarily eased political uncertainty, but a no-confidence vote is expected later this week [3] Group 3: Yen and Japanese Political Landscape - The USD/JPY is up by +0.78% as the yen is under pressure from a stronger dollar and reduced safe-haven demand due to a rebound in US equity markets [4] - Concerns over Sanae Takaichi's election as the leader of Japan's ruling Liberal Democratic Party may slow the Bank of Japan's policy tightening, impacting the yen [5] - The collapse of Japan's governing coalition complicates Takaichi's ability to pass budgets or meaningful legislation, potentially leading to another election [5]

Core Viewpoint - The yen carry trade is expected to make a comeback due to the anticipated slower interest-rate hikes under Sanae Takaichi's leadership, which could attract traders back to borrowing the low-yielding yen to invest in higher-yielding currencies [1][2][4]. Currency Market Reaction - Japan's currency has depreciated approximately 2% against G-10 currencies this week, driven by expectations of Takaichi's pro-stimulus policies leading to a delayed timeline for the Bank of Japan's (BOJ) policy tightening [2][4]. - The yen is nearing a six-month low against the dollar, with market concerns about increased government spending and inflation under Takaichi's potential administration [4][6]. Interest Rate Expectations - Market participants have reduced their expectations for immediate policy tightening, with swaps indicating a 22% chance of a BOJ rate hike at the upcoming meeting, down from about 57% prior to the leadership vote [6]. - Etsuro Honda, an advisor to Takaichi, suggested that a rate increase this month would be premature, advocating for a more suitable timing in December [5]. Carry Trade Dynamics - Analysts believe that if Takaichi maintains her stance that a weak yen is not detrimental to Japan's economy and opposes rate hikes, the carry trade could resume, leading to further yen depreciation [8]. - Masayuki Nakajima from Mizuho Bank predicts that yen selling may accelerate, potentially pushing the currency towards 180 per euro [7].