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Why Cleveland Cliffs Stock Is Down 16% in December So Far

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Dec. 24 2018, Updated 12:00 p.m. ET

US steel companies’ tough year

US steel stocks have had a weak 2018 despite the Trump administration’s tariffs on imported steel products. Investors don’t seem to be turning to steel stocks despite the protection they enjoy from higher tariffs. Most steel stocks are trading with year-to-date (or YTD) declines. AK Steel (AKS) tops the list with a YTD decline of 57% as of December 20. U.S. Steel (X), ArcelorMittal (MT), Steel Dynamics (STLD), and Nucor (NUE) follow with declines of 47%, 34%, 30%, and 19%, respectively.

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CLF: The only exception

In the US steel and iron ore space, Cleveland Cliffs (CLF) has been the only exception to this negative price action. Its stock has gained 8.5%. It has also outperformed the S&P 500 (SPY), which is trading with a loss of 7.4% YTD.

CLF stock: Giving up its gains

While Cliffs’s stock has maintained its positive price momentum amid the negative macro news, the stock has started giving away its gains. In just the last month, the stock has fallen ~18%, and it fallen 16% since the start of December. The prospect of higher US steel capacity is weighing down steel stocks. Steel Dynamics announced a new electric arc furnace carbon sheet steel mill at the end of November. This announcement added to the sector’s woes of lurking overcapacity. Plus, falling Chinese steel prices have triggered a sell-off in global steel prices.

In this series, we’ll discuss in detail which factors are driving the sell-off in steel stocks and CLF. We’ll also see what the outlook is for CLF’s stock based on these factors. We’ll look, too, at the recent analyst action for CLF and its relative valuation.

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