Thyssenkrupp’s Two-Speed Drama: Naval Ambitions Soar as Steel Bleeds Red

Thyssenkrupp is living a tale of two industries. While its naval arm TKMS chases multi-billion-euro contracts, the steel business is fighting for survival against a flood of cheap Asian imports. The contrast could hardly be starker — and investors are watching closely.

A €26.2 Billion Naval Prize Nears Decision

The defence division is the clear bright spot. TKMS, now independently listed in the MDAX, carries an order backlog of €18.7 billion for submarines and torpedoes. This week marks a critical juncture: Rheinmetall is evaluating whether to take over as general contractor for the F126 frigate programme, a move that could reshape the strategic dynamics of the project.

Even bigger is the F127 programme, with an estimated volume of €26.2 billion. TKMS is currently the sole remaining bidder. The Bundestag’s budget committee is scheduled to vote on financing on 24 June. That date is now circled on every analyst’s calendar.

Washington has already thrown its weight behind the project. On 17 April, the US State Department approved potential defence exports worth around $11.9 billion, including AN/SPY-6 radar systems and Mark-45 naval guns. That approval strengthens the procurement foundation for F127.

Meanwhile, TKMS faces a separate deadline of its own. By 29 April, the partially listed defence subsidiary must submit its bid for up to 12 Canadian submarines. Brazil is also planning to order four additional frigates, further cementing the unit’s independence.

Steel: Recovery That Isn’t One

The steel side tells a very different story. German crude steel production reached 9.3 million tonnes in the first quarter, up 9 percent year-on-year. The WV Stahl industry association calls it a “slight recovery” — but immediately cautions that this is no all-clear.

Annualised, that output equates to 37 million tonnes. The critical threshold for healthy capacity utilisation is 40 million tonnes. The industry remains well below it. Last year’s 34.1 million tonnes was an historic low.

The structural weakness is clear: German steel demand has fallen roughly 30 percent since 2017. The automotive and mechanical engineering sectors — the two biggest customers — remained weak through 2025. For Thyssenkrupp, Germany’s largest flat steel producer, these are ominous signals.

Should investors sell immediately? Or is it worth buying Thyssenkrupp?

The pain is acute at Thyssenkrupp Electrical Steel. The subsidiary will halt all production at its French site in Isbergues from June to September 2026. Cheap electrical steel from Asia now covers more than half of EU volumes, making local production costs uncompetitive.

Brussels may offer relief. The European Parliament has approved plans to sharply reduce import quotas and double protective tariffs to 50 percent. If negotiations proceed as expected, the new rules take effect on 1 July. That would give the struggling steel division some breathing room.

Exit Strategies Take Shape

Behind the scenes, Thyssenkrupp is pushing forward with structural changes — even as a strict communications blackout has been in place since 22 April ahead of the half-year results.

The former elevator subsidiary TK Elevator is back in focus. Its main owners are considering an IPO in the second half of 2026 that could value the company at up to €25 billion. Thyssenkrupp still holds 16.2 percent of the shares. Rival Kone is reportedly positioning itself for a direct acquisition. Either outcome would deliver much-needed capital for debt reduction.

At the same time, plans for the Materials Services trading division are hardening. Management is evaluating a spin-off, a sale, or a standalone IPO. A stock market debut as early as this autumn is under consideration. CFO Axel Hamann is already streamlining the unit, deploying artificial intelligence to optimise global supply chains.

What Investors Are Watching

The market is not impressed so far. Thyssenkrupp shares closed on Friday at €8.82, down roughly 9 percent since the start of the year. Barclays analyst Tom Zhang recently cut his price target to €9.00, maintaining an underweight rating. He cited geopolitical risks and the sluggish recovery in European steel margins.

The next major test comes in May with the half-year report. Investors will be looking for proof that the steel restructuring and planned divestitures are on track. They will also be watching for an outcome from talks with Indian steelmaker Jindal Steel — a deal that would mark a concrete step out of the structural crisis.

Between the naval contracts, the steel rescue, and the portfolio overhaul, Thyssenkrupp is juggling more moving parts than at any point in recent memory. The next few months will show whether it can turn those pieces into a coherent strategy.