Cleveland-Cliffs Stock (CLF) a Big Pre-Market Mover on Tariff Hike and Nippon Steel Deal

Cleveland-Cliffs Inc. (NYSE: CLF), a bellwether of the American steel industry, is experiencing a resurgence this morning, fueled by a potent combination of government policy and strategic foreign investment. With the first months of 2025 delivering nothing but pain for holders of the stock, down 38.89% on the period leading into the pre-market, Cleveland Cliffs' stock price is making a sharp turn to the upside, with a gain of 25% on the session.

This follows a remarkable shift in sentiment, triggered by President Trump's announcement of doubled tariffs on imported steel and aluminum and a significant investment pledge from Nippon Steel. The confluence of these factors has injected a fresh dose of optimism into the company's outlook, although analysts caution that potential headwinds remain.

Trump's May 30th declaration to double tariffs on imported steel and aluminum from 25% to a hefty 50%, slated to take effect on June 4, 2025, is the primary catalyst behind the recent rally. The intent of this protectionist measure is clear: to provide a significant competitive advantage to domestic steel producers like Cleveland-Cliffs by making imported steel less attractive. By inflating the price of foreign steel, the administration hopes to stimulate demand for domestically produced steel, thereby boosting the revenues and profitability of American steel companies.

Adding further fuel to the fire is Nippon Steel's planned $14 billion investment in U.S. Steel, a deal structured to ensure continued American control. This investment, part of a larger $14.9 billion acquisition bid, demonstrates a strong commitment to the revitalization of the U.S. steel industry. The inclusion of provisions to maintain U.S. Steel's headquarters in Pittsburgh and grant the U.S. government a “golden share” veto power underscores the strategic importance placed on preserving American interests within the sector. This influx of foreign capital, coupled with the protective shield of higher tariffs, creates a potentially lucrative environment for Cleveland-Cliffs and its peers.

Cleveland-Cliffs, with its fully integrated operations spanning from iron ore mining to the production of finished steel products, is particularly well-positioned to capitalize on these developments. The company's control over the entire supply chain offers a distinct advantage in a market where the cost of raw materials and transportation can significantly impact profitability. By controlling its own iron ore supply, Cleveland-Cliffs can mitigate the impact of potential price increases in the global iron ore market, ensuring a more stable and predictable cost structure.

However, despite the wave of optimism, the stock still has considerable ground to cover to reach previous levels, with the 12 month decline standing at 66% leading into today. Furthermore, analysts estimate a decrease in earnings per share (EPS) of $0.19 for the current year, although they project a rebound to $1.49 per share in the following year.

Global market dynamics, fluctuations in domestic demand, and potential regulatory changes could all impact the anticipated benefits of the tariffs. A global economic slowdown, for instance, could dampen demand for steel, offsetting the positive effects of the tariffs. Similarly, changes in environmental regulations could increase compliance costs for steel producers, eroding their profitability.

This morning's reversal will be welcome news to bulls, with CLF having made 52 week lows in Friday's regular trading session, before the announcement. The near term goal would be for a strong break above $7.50 in the coming days, however a dose of caution as always in moves of this magnitude needs to be taken.