Street Calls of the Week
Investing.com -- Goldman Sachs downgraded ArcelorMittal (AS:MT), the world’s largest steel producer, to "neutral" from "buy," saying the stock is now fully valued on its forecasts following a strong performance this year.
Shares of the company were down 3% at 08:27 ET (12:27 GMT).
Since its addition to Goldman Sachs’ buy list, ArcelorMittal shares have risen 54.8%, compared with the STOXX 600 index up 16% and the FTSE World Europe up 17.8%, the bank said.
Goldman Sachs said raw material deflation has supported margins for the Luxembourg-based steelmaker, while expectations for effective safeguards in key markets such as India and the European Union have underpinned sentiment for the stock.
The brokerage said ArcelorMittal now trades at more than 1x projected 12-month net asset value and close to 6x EBITDA.
Goldman Sachs revised its 12-month price target for ArcelorMittal to €30 per share from €29, based on 1x NAV and 4.5x EBITDA, up from 4x to reflect more positive sentiment around the EU steel industry.
The bank said medium-term growth from ArcelorMittal’s projects in Calvert, AMNS India, and Liberia, as well as the company’s EU recovery exposure, are increasingly reflected in the current price.
Goldman Sachs cautioned that structural headwinds such as high energy costs could limit further gains.
Goldman Sachs has identified several potential catalysts for ArcelorMittal. These include steel capacity cuts in China that could lower exports, effective enactment of proposed EU safeguard measures, progress in de-escalation in Ukraine, and possible U.S. tariff exemptions for Canada and Mexico if a U.S. metal alliance emerges.
Goldman Sachs said these outcomes remain uncertain and may take time. In the near term, the bank said demand remains challenged for ArcelorMittal in key markets including Brazil and Europe.
The European Commission has proposed a replacement for the current steel safeguard measure, which is set to expire in June 2026.
The proposal includes a 47% reduction in tariff-free import volumes to 18.3 million tonnes, an increase in the out-of-quota duty to 50%, and a Melt and Pour requirement to improve traceability and prevent circumvention.
Goldman Sachs said Europe’s previous safeguards have struggled to protect the industry effectively.
While the new framework could be positive, the brokerage said it does not expect the proposal to influence pricing or trade flows before the second half of 2026.
If implemented, it could lead to front-loading of imports in the first half of 2026 followed by destocking until marginal imports lift domestic prices.
At current levels, Goldman Sachs said the risk/reward for ArcelorMittal is balanced. Upside would depend on sustained cost tailwinds and effective EU policy follow-through, while downside could result from reversals in iron ore or met coal prices, higher energy costs, weaker safeguard enforcement, tariff uncertainty, risks to joint venture profitability in India, and potential external M&A activity.
Goldman Sachs added that ArcelorMittal is fundamentally fairly valued, with further gains likely dependent on policy catalysts over the next six months.