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Investing.com -- Shares of European steelmakers, including Salzgitter (ETR:SZGG) AG (XETRA:SZG), Thyssenkrupp AG (ETR:TKAG) (XETRA:TKA), and ArcelorMittal SA ( AMS (VIE:AMS2):NYSE:MT), soared in Wednesday’s trading session, responding to a double dose of positive developments from Germany and China. Salzgitter AG led the pack with a 15.7% surge, while Thyssenkrupp AG and ArcelorMittal SA rose by 13.4% and 10.5%, respectively, and SSAB (STO:SSAB) climbed 5.8%.
The industry’s rally was primarily driven by Germany’s announcement of a significant increase in infrastructure and defense spending. Friedrich Merz, the chancellor-in-waiting, indicated on Tuesday that the government would be prepared to amend the constitution to remove fiscal spending limits on defense and security, adopting a "whatever it takes" approach to national defense. This news has been a catalyst for optimism in the market, as it implies a potential uptick in demand for steel in defense and infrastructure projects.
Adding to the positive sentiment, China pledged to cut its steel output, which could alleviate some of the oversupply issues in the market and support steel prices globally. The combination of these factors has led to a bullish outlook for the sector, reflected in the sharp price increases of European steel stocks.
The market movement suggests a consensus of approval from investors, who seem to be betting on the increased fiscal spending to translate into higher revenues for steel manufacturers. The dual announcement from Germany and China has provided a much-needed boost to the industry, which has faced challenges from overcapacity and environmental regulations in recent years.
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