Cleveland-Cliffs (NYSE:CLF) stock has rallied by close to 15% over the last month considerably outperforming the broader markets. There have been positive developments for CLF stock in recent weeks. China – the top steel consumer – has been easing its Covid-19 restrictions in recent weeks and the big reopening of the Chinese economy should result in rising demand, supporting global steel prices. Cliff’s also recently said that it would see higher yearly fixed prices for steel in 2023, forecasting an average selling price of about $1,400 per ton, up from $1,300 per net ton in 2022, despite concerns of an economic slowdown. These fixed-priced contracts are expected to account for between 40% to 45% of the company’s total steel volumes for this year. Moreover, the company also indicated that it would see lower per-unit costs for steelmaking this year, on account of lower input costs and repair and maintenance expenses versus 2022.
However, despite the recent developments, there are risks as well. Multiple economic indicators increasingly point to a recession in the U.S., with the Fed continuing with its hawkish stance. This could point to an uncertain demand picture for Cliffs. The company is a major producer of flat-rolled steel products and this gives it significant exposure to the automotive market which sees considerable demand pullback through economic downturns. While some of the uncertainty is already priced in, with CLF stock remaining down by about 20% over the past year, cyclical stocks typically react more strongly through the downturn. That said, Cliffs is better insulated from input cost pressures and geopolitical uncertainties compared to other steel markets, given its considerable vertical integration. The company’s leverage is also quite manageable, with long-term debt standing at just about $4.5 billion during the most recent quarter. We value CLF stock at about $19 per share, which is roughly in line with the current market price. See our analysis on Cleveland-Cliffs Valuation: Is CLF Stock Expensive Or Cheap? for more information on what’s driving our valuation for Cliffs. See our analysis of Cleveland-Cliffs Revenue for more details on the company’s key revenue streams and how they are expected to trend.
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 Month-to-date and year-to-date as of 1/8/2023
 Cumulative total returns since the end of 2016