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Why Is CLF Stock Sagging near 52-Week Lows?


Mar. 5 2020, Updated 10:52 a.m. ET

  • Cleveland-Cliffs (NYSE:CLF) stock is trading near its 52-week lows amid the coronavirus scare. The outbreak has impacted the Chinese steel industry. Steel and iron ore prices have also fallen amid concerns about metal demand.
  • Other US steel stocks are also near their multiyear lows. U.S. Steel Corporation (NYSE:X) almost fell to its all-time lows amid the coronavirus-led sell-off.
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Cleveland-Cliffs stock

So far, Cleveland-Cliffs stock has fallen more than 31% in 2020. The stock has underperformed broader markets. Last year, the company underperformed the broader markets and steel stocks like AK Steel (NYSE:AKS), Nucor (NYSE:NUE), and Steel Dynamics (NASDAQ:STLD). However, in 2018, Cleveland-Cliffs outperformed steel producers by a wide margin. Currently, the stock is trading slightly above its 52-week low of $5.38.

What’s driving the sell-off in CLF stock?

Concerns about the coronavirus have a negative impact on CLF stock as well as the broader metals and mining space. Notably, iron ore prices have fallen this year amid concerns about Chinese demand. Chinese and global steel prices have also come under pressure. China’s steel production rose sharply in January. However, since the demand hasn’t been commensurate due to coronavirus-led shutdowns, China’s steel inventories have risen. Iron ore and US steel prices impact Cleveland-Cliffs’ average realized prices. The metric fell in the fourth quarter of 2019 amid lower iron ore steel prices. Read Why CLF Stock Fell After Its Q4 Earnings Release to learn more.

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Cleveland-Cliffs and AKS merger

The Cleveland-Cliffs and AK Steel merger will likely be completed this month. The merger completion is subject to shareholder approval. While announcing the merger, Cleveland-Cliffs said that the transaction will be earnings accretive. Also, the company’s HBI (hot-briquetted iron) plant is coming online this year. Cleveland-Cliffs expects the HBI plant to add $50 million to its 2020 EBITDA and $200 million to its 2021 EBITDA. While the company’s medium to long-term outlook looks positive, coronavirus fears might continue to weigh heavily on CLF stock in the short term.

Analysts’ ratings for CLF stock

Three analysts rated Cleveland-Cliffs as a “buy” or higher, while five analysts rated the stock as a “hold.” Meanwhile, one analyst polled by Thomson Reuters rated the stock as a “sell.” Analysts have a mean consensus target price of $7.89 on CLF stock. The target price represents a potential upside of almost 38% over the current prices.


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