Tariff Clarity And Sustainable Demand Will Shape Stainless Steel Future

Key Takeaways

• Delayed global infrastructure and trade clarity are currently suppressing demand, but pent-up restocking and sector recovery are expected to drive revenue and earnings rebound.
  
• A focus on sustainable products, specialty alloys, and production efficiency better positions Acerinox for margin expansion, top-line growth, and long-term competitiveness.
  
• Geopolitical uncertainty, rising low-cost imports, weak demand, overcapacity, and regulatory shifts are pressuring margins, profitability, and growth outlook in core markets.

Catalysts

Manufactures, process, and markets stainless steel products in Spain, the United States, Africa, Asia, Rest of Europe, and internationally.

• Global infrastructure buildout and urbanization remain delayed due to geopolitical and tariff-related uncertainty, leading to suppressed order volumes and stock levels well below historical averages. Once trade and tariff clarity is achieved, management expects pent-up demand and restocking to drive a strong rebound in stainless steel and high-performance alloys sales, directly benefiting revenues and earnings.
  
• Increasing customer preference and regulatory focus on sustainability is accelerating adoption of recycled and low-CO2 stainless steel, and Acerinox's successful EcoAcerinox product line-with 90%+ recycled content and 50% lower CO₂ intensity-positions it for long-term share gains and higher-margin sales as ESG standards tighten and customers shift procurement, supporting margin improvement and top-line growth.
  
• The strategic shift towards high-value specialty alloys (e.g., via Haynes and VDM Metals acquisitions) is increasing Acerinox's exposure to sectors like aerospace, which are showing robust demand despite weakness in oil & gas and chemicals. This transition is expected to enhance revenue mix and raise consolidated EBITDA margins over time.
  
• Ongoing investments in process automation, energy efficiency (Beyond Excellence initiative), and U.S. capacity (notably the 20% expansion at the Kentucky NAS plant) are set to reduce per-unit costs while enabling volume growth in a protected, structurally advantaged U.S. market. These will support both margin expansion and earnings resilience during demand normalization.
  
• Industry-wide supply discipline in developed markets, coupled with increasing import protectionism (e.g., Section 232 tariffs, expected further EU measures), is likely to keep domestic pricing more robust and reduce volatility-improving Acerinox's pricing power and protecting operating margins in its key North American business.

Acerinox Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Acerinox's revenue will grow by 8.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.6% today to 5.6% in 3 years time.
• Analysts expect earnings to reach €409.4 million (and earnings per share of €1.65) by about September 2028, up from €92.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €531 million in earnings, and the most bearish expecting €302.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.8x on those 2028 earnings, down from 28.3x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 14.4x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.76%, as per the Simply Wall St company report.

Acerinox Future Earnings Per Share Growth

Risks

• Persistent geopolitical uncertainties, regional conflicts, and especially the ongoing tariff war are creating a "wait-and-see" environment across global markets, leading to postponed investment decisions, project delays, and low demand in both Europe and the US; this structural uncertainty directly threatens revenue growth and order volumes over the long term.
  
• Surging imports of low-priced stainless steel into Europe (up to 75-80% growth), mainly from Asia (China, Indonesia, via Vietnam or Taiwan) and compounded by loopholes in rules of origin, are driving down local prices and increasing inventories, eroding market share and compressing net margins in Acerinox's core European operations.
  
• High capital expenditure and increased net financial debt (€1.2 billion), much of it incurred at the low point of the cycle, heightens financial risk; this, combined with headwinds from weaker dollar conversion, could dampen future earnings and limit financial flexibility if markets do not recover as quickly as expected.
  
• Exposure to cyclical end-markets, particularly in Europe (e.g., automotive, construction, oil & gas, chemicals), has resulted in ongoing demand weakness and unfavorable product mix shift (toward lower-margin ferritic grades), reducing high-margin sales and putting structural pressure on profitability and EBITDA recovery.
  
• Ongoing industry overcapacity, especially from state-subsidized Asian producers, and the risk that technological or regulatory trends (such as increased recycling rates and stricter ESG requirements) dampen primary stainless steel demand, could structurally reduce revenue opportunities and heighten margin pressure for Acerinox over the long term.

Valuation

• The analysts have a consensus price target of €13.043 for Acerinox based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €15.5, and the most bearish reporting a price target of just €10.2.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €7.3 billion, earnings will come to €409.4 million, and it would be trading on a PE ratio of 10.8x, assuming you use a discount rate of 10.8%.
• Given the current share price of €10.55, the analyst price target of €13.04 is 19.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.