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Russia’s War on Ukraine Is Hurting Steel Supply. Why Cleveland-Cliffs Stock Could Benefit.

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Cleveland-Cliffs could benefit from a shortage of steel.

Sean Gallup/Getty Images


Cleveland-Cliffs

stock is JPMorgan’s top pick in the steel sector, the investment bank said Thursday, as Russia’s war on Ukraine hits global supply for steel. Cleveland-Cliffs stock is gaining.

In a Thursday report, JPMorgan analyst Michael Glick noted that “Russia’s invasion a month ago nearly instantly set off a butterfly effect across thesteel markets,” with the impact only beginning to be felt in North America. When the invasion began, steel exports from Russia and Ukraine almost immediately stopped, while demand in North America is set to grow. That could push steel prices up to $1,500 a ton for 2022. “If we don’t see a resumption in Black Seaexports in the coming quarters, which is our base case, it’s hard to see what isgoing to supply that demand,” Glick writes.

As a result, Glick put Overweight ratings on nearly all of the steel sector, including


Commercial Metals

(CMC),


Steel Dynamics

(STLD), and


Stelco

(STLC.Canada) (Nucor (NUE) received a Neutral rating and


U.S. Steel

(X) was rated Underweight).

Cleveland-Cliffs, however, is his favorite because it is “long raw materials via its iron ore assets, pellets with excess capacity, [hot-briquetted iron] plant, scrap business and also has key steelmaking assets for the automotive industry,” Glick writes. “These assets have clearly gained immensely in their strategic (as well as financial) value in a world where war is causing a shortage of metallics.”

Glick put a $44 price target on Cleveland-Cliffs, up 51% from Wednesday’s close of $29.16. The stock was up 11.9% to $32.62 Thursday afternoon.

Write to Ben Levisohn at ben.levisohn@barrons.com

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