Cleveland-Cliffs or Nucor: Which Steel Giant Offers the Best Turnaround Play?

The U.S. steel industry is at a crossroads. Post-pandemic demand shifts, tariff uncertainties, and the push for decarbonization have created a complex landscape. Cleveland-Cliffs (CLF), the nation’s largest iron ore producer and a vertically integrated steelmaker, has emerged as a standout performer, but rivals like Nucor (NUE) are leveraging their own strengths. For investors eyeing a steel market rebound, the question is: Does Cleveland-Cliffs’ recent momentum make it the best bet, or are there better options?

Cleveland-Cliffs: Riding Strong Margins and Strategic Bets

Cleveland-Cliffs’ first-quarter 2025 results underscore its resilience. Revenue surged 27% year-over-year to $5.8 billion, driven by robust automotive contracts, AK Steel synergies, and higher iron ore prices. Its operating margin hit 19.1%, outpacing Nucor’s 14.3%, thanks to its integrated blast furnace model and control over raw materials. The company’s decision to restart its idled No. 6 blast furnace in early 2025, boosting capacity by 1.5 million tons annually, signals confidence in demand recovery.

Cleveland-Cliffs is also positioning itself for the future. A $9.5 million DOE grant is funding hydrogen-based decarbonization at its Middletown Works, aiming to cut emissions by 1 million tons annually. Additionally, a new transformer plant in Weirton targets EV demand, though automakers’ slower-than-expected shift to EVs (many reverting to hybrids) poses a near-term risk.

Nucor’s Flexibility Amid Volatility

Nucor, a leader in electric arc furnace (EAF) production, reported Q1 2025 revenue of $9.2 billion, up 18% year-over-year, but faces headwinds from soaring scrap prices. Its May 2025 hot-rolled coil (HRC) price cut—$930/ton versus Cleveland-Cliffs’ $975/ton—reflects distributor inventory saturation and scrap cost pressures. However, EAFs’ agility to pivot with raw material prices could be an advantage if scrap costs normalize.

The company’s geographic diversity and focus on construction products like rebar may also buffer it against automotive demand swings. Yet, rising interest rates have dampened construction activity, squeezing Nucor’s rebar sales.

Industry Crosscurrents and Risks

The steel market’s volatility hinges on three factors:
1. Tariffs: The 25% Section 232 tariffs remain in place, but clarity after July 2025 could swing prices by $50–$100/ton.
2. Reshoring: Cleveland-Cliffs forecasts a 5 million-ton demand boost from reshoring by 2026, a tailwind for integrated producers.
3. Decarbonization: Both companies are investing in green initiatives, but costs and timelines remain uncertain.

The Investment Decision: Cleveland-Cliffs or Nucor?

Cleveland-Cliffs’ margin efficiency, vertical integration, and strategic moves (e.g., EV-focused steel) give it an edge in the near term. Its 27% revenue growth and 19.1% operating margin suggest strong execution. However, its reliance on iron ore prices and blast furnace operations leaves it vulnerable to supply disruptions.

Nucor’s EAF model offers flexibility in volatile scrap markets, and its lower debt levels (compared to peers) provide a buffer. But its margin pressure and construction exposure require a more cautious approach.

Conclusion: Cleveland-Cliffs Leads, But Diversification Matters

Cleveland-Cliffs is the clear leader in margins and strategic positioning for reshoring and decarbonization. Its 19.1% operating margin and $5.8 billion Q1 revenue reflect disciplined execution, while its hydrogen projects position it for long-term sustainability. However, investors should consider pairing CLF with Nucor for diversification, as Nucor’s scrap-driven model may outperform if tariffs ease or scrap prices drop.

The steel market’s turnaround hinges on tariff clarity and infrastructure spending. Cleveland-Cliffs’ integrated model and strong automotive ties make it the top pick, but a balanced portfolio—accounting for commodity price swings and decarbonization timelines—is key. With reshoring demand on the horizon and federal incentives flowing, the steel sector’s rebound is likely, but investors must choose wisely.

In the end, Cleveland-Cliffs’ current momentum and strategic bets give it the edge for a steel market rebound. Yet, the sector’s risks demand vigilance—and a watchful eye on Nucor’s flexibility.