Morgan Stanley has moved Cleveland-Cliffs from an Overweight to an Equal-weight rating, arguing that much of the upside from the recent supply-led increase in U.S. steel prices is already embedded in steel equities.
The brokerage upgraded its near-term HRC (hot-rolled coil) price assumptions after HRC prices reached roughly $1,140 per short ton. Morgan Stanley attributed the run-up to constrained domestic supply, extended mill lead times and higher import costs tied to disruptions in the Middle East. Despite the stronger near-term outlook, the bank expects that growing domestic production and a rebound in imports will alleviate tightness over time, pushing prices lower across 2027 and 2028.
While Morgan Stanley nudged its price target for Cleveland-Cliffs up to $12.50 from $12.00, the firm noted that the stock's about 50% rally since early April has produced a more balanced risk-reward profile. The bank said higher steel prices should bolster earnings in the near term but that further upside for Cleveland-Cliffs is limited relative to peers.
On the pricing front, Morgan Stanley now models average HRC prices of $1,112 per ton in 2026, $1,012 in 2027 and $900 in 2028. These projections are meaningfully higher than the firm’s prior estimates and imply that prices will remain elevated through the second half of 2026 before moderating as supply conditions normalize.
Across North American steel producers, the bank left an Overweight rating only on Commercial Metals Company, saying concerns about new rebar supply appear overly discounted. Morgan Stanley maintained Equal-weight ratings on Nucor and Steel Dynamics, increasing their respective price targets to $258 and $270.
The firm also lifted earnings forecasts across the steel sector to reflect the stronger pricing environment, but it cautioned that profitability is likely near a cyclical peak and could decline after 2027 as steel prices retreat from current levels.
Context for market participants - Investors in steel producers and related industrials should weigh the bank’s view that price-driven benefits may be transitory. The combination of sharply higher spot HRC, near-term earnings support and the prospect of easing supply conditions later in the decade creates a mixed backdrop for equity performance in the sector.