Cleveland-Cliffs Inc.'s CLF shares closed at $9.40 yesterday, close to their 52-week low of $8.50.

The company’s shares have lost 26.3% in the past six months, underperforming the Zacks Mining – Miscellaneous industry’s decline of 12%. The bearishness is due to the underlying challenges in the U.S. steel industry, partly stemming from the weakness in steel prices, which have triggered a downward revision in CLF’s earnings estimates.

Technical indicators show that CLF has been trading below the 200-day simple moving average (SMA) since April 30, 2024. The stock is also been trading below the 50-day SMA since March 3, 2025.  Following a death crossover on June 13, 2024, the 50-day SMA continues to read lower than the 200-day SMA, indicating a bearish trend. 

CLF’s Shares Trade Below 50-Day SMA

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Given the pullback in Cleveland-Cliffs’ shares, investors might be tempted to snap up the stock. But is this the right time to buy CLF? Let’s find out.

Weak Prices Weigh on CLF’s Prospects 

CLF, like most U.S. steel producers, was hamstrung by the significant downward correction in steel prices last year, which has largely contributed to the stock's downward slide. U.S. steel prices declined sharply in 2024 due to a slowdown in end-market demand and oversupply after a strong run in late 2023 that extended into early 2024.

Benchmark hot-rolled coil (HRC) prices tumbled more than 40% last year from $1,200 per short ton at the start of 2024. The downside was due to a combination of factors, including a pullback in steel mill lead times, an oversupply of steel aggravated by increased imports, reduced demand from key industries and economic uncertainties. Sluggish industrial production and construction activities also contributed to the decline. Sluggish industrial production and construction activities also contributed to the decline. 

A slowdown in global automotive production curtailed steel consumption in this key end-market in 2024. The construction sector in the United States experienced a slowdown due to high interest rates, which dampened steel demand. Elevated borrowing costs and inflation took a bite out of the residential construction industry. Manufacturing activities also weakened amid the softening demand for goods and higher borrowing costs. Despite some green shoots of recovery in manufacturing and construction, a significant demand rebound for steel is unlikely over the near term.

The recent steel mill price hikes and the Trump administration's imposition of a 25% tariff on all steel imports into the United States have led to an uptick in HRC prices lately. However, a significant recovery is not expected over the near term, given the weak manufacturing backdrop and a still-challenging demand environment. 

While the company expects a sequential rise in average selling prices in the first quarter of 2025, prices are expected to remain lower year over year in the quarter, hurting its performance. 

Vertically Integrated Profile & Competitive Strength Aid CLF 

Cleveland-Cliffs is the largest producer of iron ore pellets in North America and the region's biggest flat-rolled steel producer. The acquisition of AK Steel Holding Corporation, completed in March 2020, allowed CLF to become a vertically integrated steel company. Its vertically integrated footprint, starting from mining to the production of high-value finished steel products, provides it with a competitive advantage in supplying automotive and other steel end markets. As a leading supplier of automotive-grade steel in the United States, Cleveland-Cliffs’ automotive steel business remains the fulcrum of its primary competitive strength. 

CLF benefits from its competitive strength by leveraging the ability to source its primary steelmaking feedstock, iron ore pellets, as well as scrap and hot-briquetted iron (HBI) domestically and internally at a stable cost vis-à-vis its peers that largely depend on imported pig iron whose supply has been disrupted amid the Russia-Ukraine conflict.

Stelco Buyout Bolsters CLF’s Steelmaking Capabilities 

Cleveland-Cliffs, in November 2024, closed its buyout of Stelco Holdings Inc. The acquisition enhances CLF’s steelmaking capabilities, doubling its exposure to the flat-rolled spot market and leveraging cost advantages in raw materials, energy, healthcare and currency. Stelco's integration diversifies CLF’s customer base across construction and industrial sectors, generating synergies in procurement, overhead and public company-related expenses. CLF is expected to benefit from the contribution of shipments from Stelco in 2025.

Cost Cuts to Yield Margin Benefits for Cleveland-Cliffs 

Cleveland-Cliffs is executing cost-cutting initiatives, leading to reduced steel-making expenses. In 2024, the company achieved a $30 per ton reduction in steel unit costs. CLF also realized a roughly $15 per ton sequential decline in unit costs in the fourth quarter of 2024. It is expected to continue benefiting from reduced steel unit costs in 2025, aided by Stelco. CLF expects a reduction of approximately $40 per net ton in unit costs in 2025 compared with 2024.

Cleveland-Cliffs’ Earnings Estimates Going Down

The Zacks Consensus Estimate for 2025 for CLF has been revised downward over the past 60 days. The consensus estimate for the first quarter of 2025 has also been revised lower over the same time frame.
 
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

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CLF Stock Underperforms Industry & S&P 500  

CLF’s price performance has been lackluster, partly reflecting the broader industry challenges triggered by a significant decline in steel prices. Its shares have lost 57.5% over the past year, underperforming the industry’s 8.6% decline and the S&P 500’s rise of 10.4%. The stock has also underperformed its major U.S. steel-making peers, with Steel Dynamics, Inc. STLD and Nucor Corporation NUE declining 12.9% and 35.8%, respectively, while United States Steel Corporation X gaining 4.8% over the same period. 

CLF’s One-year Price Performance

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How Should Investors Play the CLF Stock?

Cleveland-Cliffs benefits from its vertically integrated footprint, competitive strength and cost-saving actions. The Stelco buyout also reinforces its steelmaking capabilities and expands its exposure to the flat-rolled spot market. Despite these positives, CLF is exposed to the choppiness in the steel space, which has led to its underperformance. Weak prices, coupled with declining earnings estimates, cast a pall on the company's prospects. It is not advisable to buy this Zacks Rank #4 (Sell) stock until the company demonstrates substantial improvement in its financial performance.  


You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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