Morgan Stanley cuts Cleveland-Cliffs to Equal-weight, sees steel rally peaking

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Summary · why it matters

Morgan Stanley downgraded Cleveland-Cliffs to Equal-weight from Overweight, arguing that a supply-driven rally in U.S. steel prices is nearing its peak and that much of the benefit from elevated prices is already reflected in steel equities. The brokerage raised its near-term steel price forecasts after U.S. hot-rolled coil prices climbed to about $1,140 per short ton, supported by tight domestic supply, longer mill lead times, and higher import costs linked to Middle East disruptions, but it expects additional domestic production and rising imports to eventually ease the market, leading prices lower in 2027 and 2028. Morgan Stanley increased its price target on Cleveland-Cliffs to $12.50 from $12.00 but said the stock's roughly 50% rally since early April has left a more balanced risk-reward profile, with higher steel prices supporting near-term earnings but limited upside relative to peers. The bank now forecasts average hot-rolled coil prices of $1,112 per ton in 2026, $1,012 in 2027, and $900 in 2028, compared with previous estimates that were materially lower, and expects prices to remain elevated through the second half of 2026 before moderating as supply conditions normalize. Among North American steel producers, Morgan Stanley maintained an Overweight rating only on Commercial Metals Company, citing overly discounted concerns around new rebar supply, while keeping Equal-weight ratings on Nucor and Steel Dynamics and raising their price targets to $258 and $270, respectively. The firm also lifted its earnings forecasts across the sector to reflect stronger steel pricing, while cautioning that profitability is likely near a cyclical peak and could decline after 2027 as steel prices retreat from current levels.

Impact on stocks 4

Materials± Mixed · 2 stocks
Cleveland-Cliffs Inc
CLF
▼ NegativeCapitalrelevance

Morgan Stanley downgraded to Equal-weight, citing steel rally peaking and limited upside.

Commercial Metals Company
CMC
▲ PositiveCapitalrelevance

Morgan Stanley maintained Overweight rating, citing overly discounted concerns around new rebar supply.

Critical Materials & Supply Chain▲ · 2 stocks
Nucor Corp
NUE
± MixedCapitalrelevance

Morgan Stanley kept Equal-weight rating but raised price target to $258; sector outlook mixed.

Steel Dynamics Inc
STLD
± MixedCapitalrelevance

Morgan Stanley kept Equal-weight rating but raised price target to $270; sector outlook mixed.

Theme Impact 1

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