Thyssenkrupp Shares Catch a Tailwind from Two Capitals: Berlin and Brussels

Thyssenkrupp shares rally 21% as investors bet on German state stake in naval unit TKMS and EU steel tariffs, but RSI above 80 signals overbought conditions.

The industrial conglomerate is being pulled in opposite directions by its own divisions, yet the stock has surged more than 20% over the past month. Investors are betting that both Berlin’s defence ambitions and Brussels’ trade policy will accelerate the long-overdue restructuring.

State Interest in the Navy Yard

Defence Minister Boris Pistorius is examining the possibility of the German government taking a stake in Thyssenkrupp’s naval subsidiary TKMS, following the model recently applied to tank maker KNDS. Berlin has already greenlit a 40% holding in that Leopard 2 manufacturer at an enterprise valuation of €18bn to €20bn. If the blueprint is copied for TKMS, it would hand the Kiel-based shipbuilder strategic stability and a deep-pocketed backer for major projects.

TKMS is arguably the healthiest part of the group today. Its order book stands at roughly €18.5bn, a level of capacity utilisation that other segments can only dream of. The subsea and surface vessel specialist plans to add a low four-digit number of staff by the end of the decade, including around 1,500 new roles at the Wismar site alone by 2029.

The contrast with the rest of Thyssenkrupp could hardly be starker. The group’s second-quarter revenue came in at €8.4bn, but it booked a net loss of €11m. The steel and trading divisions are battling cyclical headwinds while the auto-parts unit faces its own painful rationalisation.

Indiana Shutdown as Brussels Lends a Hand

Management is taking the axe to one of the weaker links. The Automotive Technology segment is closing its chassis components plant in Terre Haute, Indiana. The move is intended to reduce earnings volatility and push margins higher in the parts business – a necessary surgery that analysts view as a pragmatic step.

Help from an unexpected quarter arrived at almost the same time. The European Parliament this week voted to tighten tariffs on cheap steel imports from third countries, a move that shields the bloc’s producers from unfair competition. For Thyssenkrupp’s steel division, that means less import pressure and more stable pricing – precisely the environment needed to support internal cost cuts already under way.

Rally Pushes Stock into Overbought Territory

The capital market is rewarding every piece of good news. The Thyssenkrupp share has climbed nearly 21% over the past 30 sessions alone, trading at around €10.76. JPMorgan has lifted its price target to €11.80 while keeping a “neutral” rating; Jefferies is more bullish and recommends buying.

Yet the speed of the advance has pushed the relative strength index to 82.3, well into overbought territory. Technically, the stock is due for a breather. Whether official signals from Berlin can provide enough momentum to override that warning depends on how quickly the government moves towards a TKMS stake.

A Demerger and a Trading Arm on the Move

Alongside the naval and auto stories, the management is pressing ahead with structural separation. The spin-off of Materials Services, the distribution and trading division, has been confirmed. The unit generated sales of €5.78bn in the first half of its financial year, even though shipment volumes dropped from 2.3m to 1.7m tonnes. Some 39% of its revenue comes from the United States, making it particularly exposed to transatlantic trade dynamics. Full-year growth is forecast at a modest 2% to 5%.

The bigger picture for the overall group remains the planned unbundling of its disparate segments. Delays in that process are the single biggest risk to the current rally. For now, Thyssenkrupp is holding onto its full-year guidance while management focuses on improving free cash flow – a metric that has disappointed before.

Investors are placing their bets on two separate forces: a state-backed revival in naval shipbuilding and tougher European trade defences. If both materialise, Thyssenkrupp’s turnaround story gains a powerful dual engine. But the stock’s technical overstretch and the still-unresolved structure of the conglomerate leave the door open for a sharp pullback.