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Can Cleveland-Cliffs Stock Continue Outperforming Peers in 2019?

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US steel stocks surge after a tough year

US steel stocks had a weak 2018 despite the Trump administration’s tariffs on imported steel products. However, after a rough 2018, US steel stocks have had a strong start to 2019. Nucor (NUE) and Steel Dynamics (STLD) have risen 11.5% and 12.0% so far, respectively, based on their closing prices on January 17. U.S. Steel (X) and AK Steel (AKS) have risen 16.3% and 22.7% YTD, respectively. Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, is up 17.7%.

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CLF: Can the stock’s resilience continue?

In the US steel and iron ore space, Cleveland Cliffs stock was the only exception in 2018. The stock rose 6.7% in contrast to negative price returns for other US steel companies as well as a decline of 6.3% in the S&P 500 (SPY). Cliffs has long-term contracts, which means the company has more revenue visibility and is less affected by day-to-day volatility in steel and iron ore prices. However, the question remains as to whether Cliffs stock can show the same resilience it showed it 2018.

Series preview

In this series, we’ll look at whether Cleveland Cliffs can continue this resiliency by looking at the key drivers of Cliffs’ top and bottom lines. We’ll see how US steel production and steel prices are expected to move in 2019. China’s slowdown has been hurting the US steel sector lately. We’ll also discuss the outlook for China’s steel and iron ore prices. Finally, we’ll look at recent analyst action for CLF and its relative valuation.

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