Meme stock Cleveland-Cliffs (NYSE:CLF) could suffer a price retreat in the near term because of its weaker-than-expected second-quarter earnings and the potential pressure on the industry from China’s slowing recovery. However, we believe that surging demand for steel from several industries and the recently passed infrastructure bill should drive the performance of fundamentally sound steel stocks Nucor (NUE), Companhia Siderúrgica (SID), Aperam (APEMY (OTC:APEMY)), and Acerinox (ANIOY (OTC:ANIOY)). Let’s discuss.The shares of popular iron ore and steel manufacturer Cleveland-Cliffs Inc. (CLF) in Cleveland, Ohio, have gained roughly 70% in price year-to-date, capitalizing on growing investor optimism about the steel industry. Also, the company was caught up in the meme craze. As North America’s largest flat-rolled steel producer, CLF has been trying to achieve its zero net debt goal using its free cash flow, and hopes to benefit significantly from the Senate’s recent passage of a bipartisan infrastructure bill.
However, the company’s weaker-than-expected second-quarter earnings, amid a favorable industry backdrop, and with the potential impact of China's slowing recovery on the metals and mining industry, the stock to suffer a price decline in the near term.
In contrast, we think its peers, Nucor Corporation (NYSE:NUE), Companhia Siderúrgica Nacional (SID), Aperam S.A. (APEMY), and Acerinox, S.A. (ANIOY), are well-positioned to offset the pressure created on the industry by macro issues in China and benefit from the infrastructure bill. So, we think these stocks are better investments than CLF now.