Analyst Sees US Steel Price Rebound Under Trump's Pro-Tariff Stance, Upgrades Cleveland-Cliffs Stock

As Donald Trump prepares to take office on January 20, 2025, investors are bracing for potential changes in the U.S. steel industry, with the president-elect's pro-tariff policies expected to impact the sector. GLJ Research analyst Gordon L. Johnson II has upgraded Cleveland-Cliffs Inc. (CLF) to 'Buy' from 'Sell', citing a potential rise in U.S. HRC prices and positive seasonality in the U.S. steel sector from January to April. Let's delve into the analyst's reasoning and explore the potential implications for CLF's stock performance.



Johnson II expects U.S. HRC prices to rise to $900/ton in May 2025 before falling to $705/ton by July, resulting in an aggregated steel price of $1,055/ton for CLF in 2025, slightly higher than the consensus estimate of $1,050.22/ton. This price increase, coupled with the positive seasonality, could lead to improved financial performance for CLF. Additionally, Johnson II projects adjusted EBITDA and adjusted EPS of $945 million and -$0.56, respectively, for 2025, which are more optimistic than the consensus estimates of $1.32 billion and -$0.09.

However, it's essential to consider the potential downstream effects of Trump's pro-tariff policies on other sectors. Higher steel prices could lead to increased production costs for downstream industries, such as manufacturing, construction, and automotive sectors. This could result in reduced competitiveness with international counterparts, potentially leading to job losses and slower economic growth. Additionally, higher steel prices could result in increased consumer prices, damaging the steel industry as part of a wider economic slowdown.



In conclusion, the analyst's upgrade of Cleveland-Cliffs to 'Buy' from 'Sell' is based on the potential rise in U.S. HRC prices and positive seasonality in the U.S. steel sector. While this could lead to improved financial performance for CLF, investors should also consider the potential downstream effects of Trump's pro-tariff policies on other sectors. As always, it's crucial to conduct thorough research and consider multiple perspectives before making investment decisions.

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