When the U.S. initiated a trade war through tariffs, it hurt global economic growth. After consumers spent more to avoid the tariff, that tailwind is gone. This will hurt demand for aluminum, steel, iron ore, and copper.
Cleveland-Cliffs (CLF), whose stock lost 60% in the last year as of last week, is the riskiest iron ore producer. In the first quarter, Cliffs posted a $0.92 loss (non-GAAP). Revenue fell by 11% Y/Y to $4.63 billion. In fiscal year 2025, the firm is forecasting a steel unit cost cut of $50 per net ton. Capital expenditures will be $625 million, down from a previous target of $700 million.
The 25% tariffs on steel will hurt sales. Unfortunately, its acquisition of Stelco increases the headwinds, along with hurting its balance sheet. CEO Goncalves said that the broader tariffs on Canada also had an impact on the company’s clients. Clients were impaired in selling their products to the U.S. markets.
The CEO said he would not have been so eager to buy Stelco if he had known the U.S. would not treat Canada as its friend. Still, Goncalves said that the Carney-Trump meeting is a step in the right direction.
Your Takeaway
Investors should expect iron ore markets to worsen before they get better. Short sellers hold a 14.14% short float against the stock.
Consider watching Newmont (NEM) and Teck Resources (TECK) for gold mining exposure and Freeport-McMoRan for copper.
