European steel executives and dealmakers breathed a sigh of relief in 2021 when US President Joe Biden undid tariffs on imports of the metal, which had been imposed by his predecessor Donald Trump in 2018.

With Trump back in the White House once again in 2025, dealmakers and executives are left wondering whether tariffs on European steel are coming again; and if M&A can be used to cushion any potential blows.

“It is difficult to predict the extent that European steel exports will be subject to US tariffs, but based on the recent rhetoric from the incoming administration it certainly feels like a scenario that the industry should take seriously,” according to Nicholas Rees, London-based M&A partner at Clifford Chance.

Can M&A help? “In general terms, the companies with the broadest shoulders, in terms of diverse geographical exposure (both from a sales and production perspective) and strong balance sheets, would likely be best able to withstand the direct and indirect impact of tariffs,” Rees suggested.

“Whilst the imposition of tariffs may act as a driver to consolidation in the steel sector, we are likely to see close scrutiny of any transactions from national regulators thereby increasing the execution risk of any related transactions,” Rees also said.

European steel M&A volumes have exceeded EUR 1bn annually six times over the last decade, with an average volume of EUR 1.3bn, according to Mergermarket data. In 2024, 41 deals were completed for an above-average total volume of EUR 1.8bn.

The high watermark came in 2023, after US tariffs came to an end, with EUR 3.2bn over 43 deals, followed by EUR 2.4bn over 47 transactions in 2021. The low watermark came in 2020, during the trade war, with just EUR 264m spread over 29 deals.

A recent deal was finalised in December when  Amper [BME:AMP] of Spain announced the acquisition of 100% of Navacel Process Industries, which specialises in the design, manufacture and assembly of metal structures, mainly for the offshore wind industry. The price of EUR 23.8m includes cash and shares.

Valuations problematic

Global steel production in 2023 and 2024 was dominated by China, with nearly 54% of production, according to a 2024 report on the industry from the World Steel Association. Germany was the only member of the European Union (EU) in the top ten, in seventh place.

Turkey, which spans Europe and Asia, but is outside the EU, was also in the top ten, in eighth place.

Other major steel producing nations within the EU include Italy (11th place), Spain (17th place), France (19th place), Austria (22nd place) and Poland (23rd).

Burc Hesse, partner at Latham & Watkins Germany, highlighted the sector’s high energy needs as a factor to consider. “Valuations for companies in energy-intensive industries remain under pressure and respective targets are therefore often financially less attractive to investors.”

Another M&A advisor said that European steel can be a poor bet for investors. “I don’t see much of a future for companies with very high energy usage,” he said, adding that energy prices in Germany, Austria and Switzerland (DACH) are unlikely to return to pre-2022 levels. Gas prices in the region soared after Russia’s invasion of Ukraine and subsequent sanctions.

Despite this note of pessimism, there is an opportunity for turnaround investors. For example, in October, Mutares [ETR:MUX] signed an agreement to acquire the business of Buderus Edelstahl from voestalpine [VIE:VOE]. The target, which was founded in 1731, specialises in producing special steels.

The company, based in Wetzlar, Germany has around 1,100 employees, with revenues of around EUR 360m in 2023/2024. Its special steels focus on tool steel, engineering steel, open-die forgings, closed-die forgings, hot-rolled strip, cold-rolled strip and rolled semi-finished products.

US deals to prepare?

Mergermarket intelligence identifies several deal opportunities, including Celsa Group, a Spanish steel company, which has begun a process to find a local investor who can take a 20% stake in the company. It is working with Grant Thornton as a financial advisor to determine the fair market value of a deal, while Citigroup is acting as an advisor for the placement.

The group’s parent company, Celsa Steel, agreed to a capital increase of EUR 166m in October 2024 as part of a plan developed by consulting firm Bain. It sold businesses in the UK and Nordics in November and received a grant worth EUR 35m from the regional government of Catalonia in December.

Another deal working its way through the system is industrial engineering and steel conglomerate Thyssenkrupp‘s [ETR:TKA] talks with CE Capital Partners over the sale of its Huttenwerke Krupp Mannesmann (HKM) steel mill, which has 3,000 employees in Duisburg, Germany. A decision was expected within months, as reported in November.

At the same time, Thyssenkrupp is making moves that could prepare its ThyssenKrupp Steel Europe subsidiary for a sale, as reported in August. In December, the unit’s management called on trade union IG Metall to come to the negotiating table due to a worsening industry climate – the unit generated asset impairments of around EUR 1bn in the fiscal year to 30 September.

Finally, European steel makers might want to consider deals in the US to prepare for a new era of sanctions.

“Depending on the nature of any potential tariffs, European based steel businesses might want to explore expanding directly into the US in order to help mitigate the impact of any import tariffs,” Rees said.

Hesse agreed. “For European steel companies it may well make sense to acquire businesses or production capacity in the US to avoid potential tariffs, but there are questions about which companies have the resources for such M&A and for which companies this would make sense economically,” he said.

European steel consolidation plays, defensive deals in the US and the regulatory implications of any proposals are all likely to loom large in the thinking of dealmakers in the industrials space in the next four years.