'The fog of trade wars'- JPM sees negatives for end-demand in European steel

J.P. Morgan says escalating trade frictions are likely to prove negative for end-demand in the European steel, as 25% tariffs on U.S. imports of steel and aluminium became effective on Wednesday

The broker sees "tangible tailwinds" for European steel equities, but says that "the test is how to mitigate and monetise these when perceptions do not meet reality, plus external threats continue unabated"

JPM sees that Germany's EUR 500 billion infrastructure stimulus and Ukraine reconstruction could boost European steel demand by >10Mtpa, or +8-12%

Moreover, it expects European defence spending to boost EU steel demand, after the EU and Germany announced EUR 1.3 billion in new spending

JPM adds the possibility for other EU nations to propose domestic infrastructure and higher defence spending packages has potential to boost EU steel demand further in the future

It upgrades SSAB SSABa.ST to "overweight" from "neutral", citing the company's highest exposure to Europe and U.S. infrastructure and defence sectors

It raises Voestalpine VOES.VI and Aperam APAM.AS to "neutral" from "underweight", seeing the risk-reward more balanced and valuation less demanding