Cleveland-Cliffs: A Cyclical Recovery in Its Early Innings

Why Cleveland-Cliffs is back on investors’ radar.

Steel isn’t AI, but over the past year, some commodity stocks have posted gains that would look more at home in the tech sector. Cleveland-Cliffs (CLF) is one of them. Shares of the U.S.-based steelmaker are up more than 40% over the past 12 months - a performance more often associated with semiconductors or software than blast furnaces and steel mills.

This rally has been supported by fundamentals, not just buzz. The backdrop for domestic steel producers has shifted, with higher steel prices, tighter trade policy, improving end-market demand, and the rising strategic value of U.S.-based manufacturing capacity all contributing to the change in sentiment.

Cleveland-Cliffs sits squarely at the intersection of those trends. Below, we explain why the market is increasingly treating CLF as an early-cycle recovery story - and why balance-sheet improvements and structural tailwinds could support further upside in the stock.

Cleveland-Cliffs is a vertically integrated North American steel producer with deep exposure to value-added flat-rolled steel - particularly for the automotive industry. The company controls its supply chain from iron ore mining and pellet production through primary steelmaking and downstream finishing, stamping, and tubing. That integration gives Cliffs greater visibility into costs, supply reliability, and customer demand than many peers that rely more heavily on external inputs.

That integrated model is increasingly working in Cliffs’ favor. Hot-rolled coil steel prices have climbed to roughly $960 per ton - 30% higher than a year ago - reflecting tighter supply conditions and the impact of U.S. tariffs on imported steel. Higher steel prices don’t solve every problem for Cleveland-Cliffs, but they do improve the revenue potential for producers with domestic capacity and established end-market relationships.

Rebounding demand in the auto sector is another key to the narrative. Last quarter, Cliffs shipped 4.0 million net tons of steel, up from 3.84 million a year earlier, with 30% of steelmaking revenue tied directly to automotive customers. Infrastructure and manufacturing accounted for another 29%, while distributors and converters made up 28%. Management highlighted new and expanding multi-year supply agreements with major OEMs - agreements anchored by Cliffs’ network of nine galvanizing plants dedicated to automotive-grade steel.

The company’s U.S. footprint is also gaining strategic value as trade barriers rise. With roughly 90% of revenue generated domestically, Cliffs is positioned as a trade-compliant supplier in a market that management describes as increasingly “hostile” to dumped foreign steel.

That backdrop helps explain why Cleveland-Cliffs has drawn interest from foreign steelmakers seeking access to the U.S. market through a scaled domestic platform. Against that backdrop, management recently disclosed a memorandum of understanding with a major global steel producer - an arrangement the company believes could ultimately prove accretive to shareholders.

Beyond steelmaking, Cliffs is also exploring longer-dated optionality tied to critical materials. The company has identified early signs of rare-earth mineralization at select mining sites in Michigan and Minnesota, dovetailing with broader U.S. government efforts to reduce reliance on foreign sources of essential minerals. While still in the early stages, the initiative reflects management’s growing confidence that Cliffs’ upstream asset base may carry more strategic value than the market currently assigns.

Taken together, rising steel prices, tighter trade policy, and a renewed focus on domestic manufacturing make Cleveland-Cliffs an increasingly compelling setup. While margins remain below those of higher-quality industrial peers, the company’s positioning is gaining relevance as U.S. steel market conditions improve.

Cleveland-Cliffs shares are up more than 40% over the past 12 months, as investors increasingly focus on signs of improving fundamentals in the U.S. steel market rather than the company’s recent losses. Higher steel prices, steadier automotive demand, and potential strategic shifts have supported the change in tone.

Recent financial performance has been uneven, but sequential improvement is becoming more evident. Cleveland-Cliffs reported $4.7 billion in revenue on shipments of 4.0 million net tons of steel last quarter. Results were largely in line with expectations, though the company posted a GAAP net loss of $234 million, or $0.45 per share - an improvement from the second quarter.

Beneath the headline numbers, operating performance improved meaningfully. Adjusted EBITDA increased to $143 million from $94 million in the prior quarter, driven by firmer pricing, improved mix, and continued cost discipline. Management also reduced full-year capital spending and SG&A guidance, while reaffirming its target of roughly $50 per net ton in steel unit cost reductions versus 2024, adjusted for higher automotive volumes.

Liquidity continues to provide Cleveland-Cliffs with financial flexibility as its turnaround progresses.

The company ended the quarter with $3.1 billion in total liquidity, giving it room to manage through shifting pricing and demand conditions. At the same time, leverage remains a drag on reported earnings. Annual interest expense is expected to exceed $600 million, helping explain why firmer steel prices have yet to translate into consistent profitability. At this stage, earnings power is constrained less by demand than by balance-sheet realities.

For investors assessing the opportunity, valuation presents a clear “if/then” setup. With earnings still negative, traditional P/E comparisons aren’t meaningful. Instead, Cleveland-Cliffs trades at roughly 0.4x sales and 1.3x book value—both below sector averages. If the company can demonstrate sustained margin improvement and clearer earnings power, that discount has room to narrow. If not, the market’s caution is likely to persist.

Analyst sentiment reflects cautious optimism. Of the 12 analysts covering Cleveland-Cliffs, four rate the stock a “buy,” seven recommend “hold,” and one has a “sell” rating, with an average price target near $14 per share - roughly in line with current trading levels. That said, momentum on the Street may be shifting. In early January, Morgan Stanley upgraded the stock to “overweight” and raised its price target to $17 per share, citing Cleveland-Cliffs’ potential for “true transformation” through a strategic partnership.

With the next earnings report expected around February 9 (not yet confirmed), investors will be watching for further evidence of pricing strength, sustained automotive demand, and continued financial discipline. For now, Cleveland-Cliffs remains an early-cycle recovery story, as investors begin to price in improving fundamentals ahead of a clear rebound in reported earnings.