CLF - Cleveland-Cliffs Is A Long-Term Growth Strategy

2024-04-24 23:19:02 ET

Summary

• Cleveland-Cliffs reported a massive $500mm co-investment from the DoE to convert a blast furnace producing pig iron to HBI, improving their decarbonization efforts.
• The company is focused on cost-saving initiatives and anticipates a $30/net ton cost improvement throughout eFY24.
• The emergence of AI/ML applications and infrastructure projects could drive growth for Cleveland-Cliffs as expansive power transmission, new data centers, and chip foundries will be built.

Cleveland-Cliffs ( CLF ) reported a relatively mundane q1’24 as the firm faces some headwinds and geopolitical pressure in the steel markets. As the domestic market gyrates between automotive OEM production and service center orders, China is drawing down steel inventory in an attempt to normalize localized steel prices by selling internationally. Though I anticipate this to have minimal impact on Cleveland-Cliffs’ long-term steel sales premiums through their decarbonizing initiatives, I do anticipate some near-term headwinds as the firm navigates through eq2’24. Given my positive long-term outlook for the firm, the expansion of shareholder benefits through buybacks, and management’s deleveraging initiatives, I provide CLF shares with a BUY recommendation with a price target of $28.05/share at 4.29x eFY25 EV/aEBITDA....

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