The stock market is a funny thing, honestly. You think you’ve got a handle on it, and then a titan like Cleveland-Cliffs (CLF) takes a 9% dive in a single afternoon. It happened just recently, specifically on Wednesday, January 7, 2026. One minute the mood is hopeful, and the next, everyone is scrambling to figure out why the screens are bleeding red.
If you’ve been watching the cleveland-cliffs stock price drop, you’ve probably heard the usual noise. People blame "the economy" or "tariffs." But it’s usually more nuanced than a headline. For Cliffs, this recent stumble wasn’t just bad luck. It was a collision of a major analyst downgrade, shifting trade policy rumors, and some cold reality about the auto industry.
The KeyBanc Downgrade That Started the Fire
It started with Philip Gibbs. He’s an analyst at KeyBanc who used to be a pretty big bull on the company. Then, out of nowhere, he cut his rating from "Overweight" to "Sector Weight." Basically, he told investors that the party was over for now.
Why? Because the big "catalysts" everyone was waiting for—like a massive surge in demand from car manufacturers—seem to be losing steam.
Gibbs didn't just stop at a rating change. He slashed his EBITDA expectations for the fourth quarter. He went from predicting a $63 million profit to a **$22 million loss**. That’s a massive swing. When an expert says a company is going to lose money instead of making it, investors tend to hit the exit button fast.
The stock was trading around $13.36, which Gibbs felt already baked in all the "good news," including the buzz around non-core asset sales. Honestly, when a stock hits its price target, there’s often nowhere left to go but down.
Tariffs: The Double-Edged Sword
You've probably noticed that Lourenco Goncalves, the CEO of Cliffs, is a huge fan of tariffs. He recently stood before the Congressional Steel Caucus on January 14, 2026, and cheered for the hike in steel tariffs from 25% to 50%.
On paper, this sounds great for an American producer. If foreign steel is expensive, people buy domestic, right? Well, sort of.
The problem is the "Mexican Loophole." Rumors started flying about the U.S. and Mexico negotiating a way to roll back those 50% tariffs for certain quotas of steel. The market hates uncertainty. If the 50% wall has a door in it, the protection that Cleveland-Cliffs relies on starts to look a bit shaky.
Why the Auto Industry Matters So Much
Cliffs isn't just any steel company. They are the kings of automotive steel. About 30% of their revenue comes from that sector.
- Higher Costs: Making the high-grade steel cars need is expensive.
- Shrinking Margins: Even though they are selling tons of steel, the cost to make it is creeping up.
- Demand Plateaus: If car sales don't skyrocket, Cliffs has a lot of expensive inventory sitting around.
Management has been trying to offset this by teaming up with POSCO, a South Korean steel giant. It's a smart move, but these partnerships take years to actually put cash in the bank. Investors aren't always that patient.
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The "Invisible" Headwinds
There’s also the China factor. S&P Global recently flagged that China is facing a massive steel oversupply in 2026. When China has too much steel, it tends to leak into the global market, dragging prices down everywhere. Even with U.S. tariffs, a global price slump makes it harder for Cliffs to raise its own prices.
Plus, let's talk about the loss. The company reported a net loss of $1.68 billion over the trailing twelve months. You can only run on "potential" for so long before people start looking at the balance sheet. With debt sitting at around $8 billion, the pressure is on.
What Really Happens Next?
If you're holding the bag or looking to jump in, don't panic. The cleveland-cliffs stock price drop has pushed the stock into a zone that some contrarians find attractive.
Morgan Stanley’s Carlos De Alba still has a price target of $17.00. That’s a 27% upside from where we are now. He’s looking past the current noise at the long-term value of a vertically integrated American company. But for that to happen, a few things need to go right.
First, we have the earnings report coming up on February 9, 2026. This is the big one. If they beat the consensus loss estimate of $0.56 per share, the stock could snap back. If they miss? Well, it might be a long winter in Cleveland.
Actionable Insights for Investors:
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- Watch the February 9 Earnings: Specifically, look for "unit cost reductions." Management promised to shave $50 off the cost of every ton of steel. If they hit that, the margins might finally breathe.
- Monitor Trade Quotas: Keep an eye on the U.S.-Mexico trade talks. Any "duty-free" quotas are a direct threat to the price of domestic steel.
- Check Auto Production Data: If the big car brands start cutting shifts, Cliffs will feel it first.
- Short Interest Levels: Currently, short interest is high. If the company releases even moderately good news, we could see a "short squeeze" that sends the price up faster than expected.
The steel business is cyclical, messy, and loud. Cleveland-Cliffs is right in the middle of it. It’s not a stock for the faint of heart, but the recent drop has certainly cleared out some of the "weak hands." Now, it’s all about whether Goncalves and his team can actually deliver the profits they’ve been promising.
Keep a close eye on the raw steel production numbers from the American Iron and Steel Institute. As of January 10, production was actually up 3.1% year-over-year. The steel is moving; now the company just needs to make sure they're actually keeping the money from it.