Cleveland-Cliffs' RS Rating Gains Signal Resurgence in Industrial Metals Sector

The recent improvement in Cleveland-Cliffs' (CLF) Relative Strength (RS) Rating-from 69 to 76-has sparked renewed interest in the industrial metals sector, signaling a potential inflection point for cyclical stocks in a market increasingly shaped by onshoring trends and infrastructure demand. While the rating remains below the 80 threshold typically associated with strong market leadership, the trajectory reflects broader structural shifts in the sector, driven by favorable trade policies, technological innovation, and a global push for sustainable industrial solutions.

Momentum Investing in a Resurging Sector

The industrial metals sector's momentum is indirectly bolstered by the rapid growth of the flexible industrial packaging market, which reached $85.35 billion in 2025 and is projected to grow at a 7.1% CAGR through 2034. This expansion is fueled by demand for lightweight, durable, and eco-friendly packaging solutions in industries such as chemicals and petrochemicals-sectors that are themselves reliant on metals for production and transportation. The adoption of biodegradable films and multi-layer laminates in packaging underscores a shift toward sustainability, a trend that aligns with the industrial metals sector's pivot toward green technologies and circular economy practices.

Meanwhile, the Gulf Cooperation Council (GCC) wires and cables market-closely tied to industrial metals-has surged to $5.36 billion in 2024, driven by infrastructure megaprojects like Saudi Arabia's NEOM and the UAE's smart cities. These projects require high-performance copper and aluminum cables, creating a tailwind for metals producers. However, challenges such as raw material price volatility and fragmented GCC regulations highlight the sector's cyclical nature, necessitating careful valuation analysis for investors.

Valuation Metrics and Cyclical Attractiveness

In Q3 2025, the industrial metals sector traded at a median 12.38x EBITDA and 1.78x revenue, reflecting strategic buyer confidence despite macroeconomic headwinds like higher borrowing costs. Cleveland-Cliffs, while reporting a GAAP net loss of $234 million for the quarter, saw its Adjusted EBITDA rise to $143 million, a 53% increase from Q2 2025. This improvement, coupled with a modest price target upgrade to $12.17 from $11.57, suggests the company is navigating sector-wide challenges more effectively than its peers.

The Aerospace & Defense sub-sector, which trades at a premium 20.8x EV/EBITDA, illustrates the broader Industrials sector's appeal amid geopolitical tensions and AI-driven innovation. While Cleveland-Cliffs does not operate in this niche, its focus on automotive and steel production benefits from similar tailwinds, including U.S. S-232 tariffs and domestic onshoring initiatives. Analysts at KeyBanc have upgraded CLF to Overweight, citing margin expansion potential in its automotive segment, a critical differentiator in a sector where iron ore prices are expected to decline by 10% in 2025.

Cyclical Catalysts and Risks

Base metal prices are projected to rise by 3% in 2025, supported by infrastructure spending in China and the U.S. trade deficit's sharp contraction-down 24% in August 2025 due to Trump-era tariffs. This shift has lifted Atlanta Fed GDP forecasts to 4.2% for Q3 2025, a positive signal for cyclical sectors. However, construction-related metals like iron ore face downward pressure, with further declines expected in 2026 and 2027.

For Cleveland-Cliffs, the risk-reward profile hinges on its ability to lock in long-term contracts with U.S. automakers, which provide pricing stability amid tariff uncertainty. Wells Fargo's cautious stance on domestic steel supply growth underscores the need for disciplined capital allocation, but the company's recent operational improvements and fixed-price agreements position it to outperform in a resurging market.

Conclusion: A Case for Strategic Exposure

Cleveland-Cliffs' improving RS Rating, while not yet indicative of market leadership, aligns with a broader narrative of industrial metals as a cyclical play in a post-pandemic economy. The sector's valuation metrics, though modest compared to high-growth peers, reflect a balance between tangible demand drivers (infrastructure, renewable energy) and manageable risks (commodity volatility). For momentum investors, CLF's trajectory-coupled with the GCC's infrastructure boom and U.S. onshoring trends-offers a compelling case for strategic exposure in a market poised for a multiyear upcycle.