Cleveland-Cliffs Stock Upgrade and U.S. Steel Market Insights

Understanding the Recent Upgrade of Cleveland-Cliffs Stock

GLJ Research analyst Gordon L. Johnson II has recently made headlines by upgrading Cleveland-Cliffs Inc. (CLF) from a Sell to a Buy rating, suggesting a promising outlook ahead. Johnson has projected a price target of $14.27 for CLF, hinting at optimism for the company's performance amid a fluctuating U.S. economy.

The Economic Climate and Its Impact on Steel Prices

As the U.S. economy faces challenges, analysts are closely watching how political factors, particularly Donald Trump's anticipated return to office, may influence the steel market. Trump's pro-tariff policies, known to bolster the domestic steel industry, could potentially lead to an uptick in hot-rolled coil (HRC) prices soon.

Historical Price Movements Following Elections

Historically, price dynamics following major elections have shown significant adjustments. Notably, after Trump's election in November 2016 and Joe Biden's in November 2020, U.S. HRC spot prices surged by 25.5% and 65.9%, respectively. However, this trend seems to be reversing since Trump's recent win, with prices experiencing a decline of 6.9% since then.

Seasonality and Market Trends

There is a prevailing trend within the steel sector, especially notable between January and April, where typically, steel stocks see favorable performance. Johnson poses an intriguing question for investors: Is now the right moment to invest in U.S. steel stocks, considering the current market conditions?

Trump's Policies and Their Effect on Steel Imports

From Trump's first election to his defeat against Biden, U.S. steel imports underwent a drastic reduction of 51.1%—from 2.5 million tons to just 1.2 million tons. This significant drop is often credited to the implementation of Trump's pro-U.S. steel policies that prioritized domestic production over imports.

Future Projections for Cleveland-Cliffs

Anticipating higher U.S. HRC prices, Johnson has calculated that with the increase to $900 per ton by May 2025, CLF's aggregated steel price could reach $1,055 per ton, slightly above the consensus. His forecast for 2026 also reveals an expected average price of $1,068 per ton, signaling a modest increase year-over-year.

Expected Financial Performance

In terms of financial expectations, Johnson anticipates adjusted EBITDA and EPS figures for 2025 to be $945 million and -$0.56, respectively. In contrast, consensus estimates predict higher figures for both metrics. For 2026, he projects an adjusted EBITDA of $1.804 billion and an EPS of $1.06, slightly below market consensus.

Investor Opportunities

For those looking to diversify their portfolios, there are several options available. The VanEck Steel ETF (SLX) and the SPDR S&P Metals & Mining ETF (XME) provide additional avenues for investors to gain exposure to the steel market's fluctuations.

Current Market Performance

As of recent checks, Cleveland-Cliffs shares are witnessing a slight uptick, currently up 1.26% at $10.03, showcasing a resilient performance amid pressures in the broader market.

Frequently Asked Questions

What led to the upgrade of Cleveland-Cliffs stock?

The upgrade was prompted by analyst optimism regarding future steel price increases and the anticipated positive impact of pro-tariff policies.

How do political factors influence steel prices?

Political factors, such as sanction policies and tariffs, can significantly affect domestic steel prices by either promoting local production or exposing the market to foreign imports.

What are the price targets set by analysts for CLF?

Currently, analysts have set a price target of $14.27 for Cleveland-Cliffs, indicating strong growth potential in the coming months.

Why is seasonality significant for steel stocks?

Historically, steel stocks perform well from January to April, making this period critical for investors looking to capitalize on seasonal trends.

How can investors gain exposure to the steel market?

Investors can explore options like the VanEck Steel ETF (SLX) and SPDR S&P Metals & Mining ETF (XME) for diversified exposure to the steel sector.

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