How S&P’s Downgrade and Contract Exit At Cleveland-Cliffs (CLF) Has Changed Its Investment Story

• S&P Global Ratings previously downgraded Cleveland-Cliffs to B+ from BB-, citing elevated leverage and a more stressed credit profile, while the company ended a low-margin slab supply contract with ArcelorMittal that is expected to add about US$500 million of annual EBITDA through higher-priced U.S. slab sales.
• Together, the rating downgrade and contract exit highlight a trade-off between higher anticipated profitability and increased balance sheet risk that could influence how investors weigh Cleveland-Cliffs' future resilience.
• We’ll now examine how the S&P downgrade and leverage concerns might reshape Cleveland-Cliffs’ investment narrative as year-end approaches.

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Cleveland-Cliffs Investment Narrative Recap

To own Cleveland-Cliffs, you have to believe in a U.S.-focused steel producer that can translate tariff support and auto demand into improving profitability despite current losses and a heavy debt load. The S&P downgrade to B+ underscores that leverage is now a central near term risk, even as the end of the ArcelorMittal slab contract points to a potentially stronger earnings base, so the balance between higher expected EBITDA and credit pressure has become the key short term catalyst to watch.

The most relevant recent development for this story is the termination of the low margin slab supply deal with ArcelorMittal, which Cleveland-Cliffs expects will add about US$500 million of annual EBITDA through higher priced U.S. slab sales. This move ties directly into the company’s broader cost and margin improvement efforts and could support progress toward the deleveraging that rating agencies and equity investors are watching closely.

Yet investors should also be aware that elevated leverage and a more stressed credit profile could still...

Read the full narrative on Cleveland-Cliffs (it's free!)

Cleveland-Cliffs' narrative projects $22.5 billion revenue and $590.0 million earnings by 2028.

Uncover how Cleveland-Cliffs' forecasts yield a $12.45 fair value, in line with its current price.

Exploring Other Perspectives

Seven members of the Simply Wall St Community currently put Cleveland-Cliffs’ fair value anywhere between about US$8.77 and US$56.79, reflecting very different expectations. You can set those views against the recent S&P downgrade, which highlights how balance sheet risk may shape the company’s ability to benefit from any earnings recovery.

Explore 7 other fair value estimates on Cleveland-Cliffs - why the stock might be worth 31% less than the current price!

Build Your Own Cleveland-Cliffs Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Cleveland-Cliffs research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Cleveland-Cliffs research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Cleveland-Cliffs' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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