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Today's Featured Content
Tariffs Rose: 1 Steelmaker Thrived, 1 Still StrugglesAuthor: Chris Markoch. First Published: 4/23/2026. 
Key Points
- Steel tariffs are increasing domestic demand, but profitability depends on each company’s cost structure.
- Steel Dynamics is outperforming due to its lower-cost, flexible electric arc furnace model.
- Cleveland-Cliffs continues to face margin pressure from higher fixed costs and debt obligations.
- Special Report: Elon’s “Hidden” Company
On April 20, two of America's largest steel companies reported earnings at a time that would normally be bullish for the sector. Imports are at a 17-year low in a tariff-sheltered market. However, protected pricing is only bullish if a company can profit from it. That’s where the outlook for Steel Dynamics (NASDAQ: STLD) and Cleveland-Cliffs (NYSE: CLF) diverges. For Q1 2026, Steel Dynamics reported $403 million in profit; Cleveland-Cliffs posted a $229 million loss. Understanding why those outcomes differed is essential before investors decide how to approach each stock. Why Steel Tariffs Aren’t an Automatic Buy Signal
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One small-cap company supplies a mission-critical component to Musk's xAI Colossus site that can't be built around. While retail waits for a ticker that doesn't exist yet, early money is moving into this supplier at a fraction of its potential value. See the small-cap stock powering the SpaceX buildout today
The 50% tariff on imported steel has helped choke off foreign competition and push buyers toward domestic suppliers. In Q1 2026, U.S. steel imports hit their lowest quarterly level since 2009, and domestic producers are capturing demand that used to go offshore. But the tariff is a floor, not a rocket. How high a steelmaker can go depends entirely on how cheaply it can make steel. This is where the business models of Cleveland-Cliffs and Steel Dynamics diverge sharply. The Old Model and the New ModelAt its core, Cleveland-Cliffs is an integrated steelmaker. That process is capital- and energy-intensive, with largely fixed costs—you can't easily throttle a blast furnace up or down when demand shifts. It also comes with significant infrastructure and workforce obligations. Adding to those obligations, Cliffs has a heavily unionized labor force and, despite a remarkable 95% reduction in pension and OPEB liabilities since its ArcelorMittal acquisition, still carries meaningful debt. That debt forces the company to prioritize repayment over growth. By contrast, Steel Dynamics runs 100% on electric arc furnace (EAF) technology. EAF mills melt recycled scrap metal using electricity, skipping iron ore and the blast furnace entirely, and can be dialed up or down with demand. EAF steelmaking uses roughly one-quarter of the energy of traditional blast-furnace production and produces far fewer emissions. It's faster, cheaper to operate, and structurally more flexible. STLD also owns its own scrap recycling network through OmniSource, one of the largest nonferrous recyclers in North America, which gives it a raw-materials cost advantage that integrated producers have a hard time matching. How the Business Models Showed Up in EarningsHigher steel prices boosted revenue per ton for both companies, but the key is the spread between revenue and cost. Steel Dynamics converted $5.2 billion in revenue into $700 million of adjusted EBITDA, a 13% margin. That allowed the company to repurchase $115 million in stock and raise its dividend by 6%. STLD rallied more than 10% in the days following the earnings release. Cleveland-Cliffs converted $4.9 billion in revenue into $95 million of adjusted EBITDA, a margin of roughly 2%. It still posted a net loss of $229 million after interest and other charges. Investors noted that CLF does not pay a dividend, and the stock fell over 8% after the release. Where and Why Investors Need to Look Before They LeapThat said, earnings are backward-looking, and Cleveland-Cliffs says the coming quarter should be better. On Sept. 17, 2025, the company signed a Memorandum of Understanding (MOU) with POSCO, Korea’s largest steelmaker and one of the top 10 global steelmakers. If finalized, the deal could help POSCO support and grow its U.S. customer base while giving Cliffs access to strategic partnership benefits in a favorable market. The companies have not reached a final agreement, and management says any deal must be for “full and fair value.” Analysts currently have a Hold rating on CLF, and Morgan Stanley lowered its price target to $12 from $18. That aligns with a consensus price target of $12.19, implying roughly 33% upside that suggests some belief in improvement beyond mere hope. Steel Dynamics, meanwhile, is expanding into aluminum. That initiative is currently generating about a $65 million quarterly loss, but analysts view it as a growth investment rather than a structural liability. Analysts are mixed on STLD: it carries a Hold rating with a consensus price target of $185.11, which would be more than 15% below recent prices. While some analysts have been raising their price targets, even the highest targets still imply downside from current levels. |
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