Cleveland-Cliffs: The American Steel Industry Is In An Economic Depression

SEATTLE (Scrap Monster):  Cleveland-Cliffs faces significant economic pressures and is expected to lose money in Q3 and Q4. Due to falling steel prices, its stock has declined 22% since I last covered it.

Rising production costs and a slow-moving economic slowdown in US manufacturing have severely impacted CLF’s profitability, with gross margins dropping from 25% in 2021 to 3.2%.

The American steel industry is struggling, with CLF and U.S. Steel particularly vulnerable due to overleveraging and inefficient operations compared to competitors like Nucor and Steel Dynamics.

Despite potential government support, I remain bearish on CLF amid continued durable goods headwinds and overproduction in the US steel industry.

Bipartisan protectionist attitudes regarding steel may give CLF minor risk protection, but I do not expect it to turn around until U.S. Steel is forced to dramatically lower production.

In July 2023, I published a bearish take on the U.S. steel (X) giant Cleveland-Cliffs in “Cleveland-Cliffs: Steelmakers Face Significant Recessionary Pressures.” Although there has not been an economic recession since then, CLF.

Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.

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