Al Root

The roller coaster for Cleveland-Cliffs shareholders continued on Tuesday with a big drop, following Monday's massive climb.

Shares of the steel maker were down 16% in morning trading at $13.54, while the S&P 500 was up 0.1% and the Dow Jones Industrial Average was up 0.7%.

The move came after Cliffs' shares soared 21.5% to $16.18 on Monday, after reporting better-than-expected earnings. That helped, as did plans for the company to investigate mining for rare earths materials at its domestic iron ore facilities.

Rare earths have been a hot trade in 2025 since China threatened export restrictions on the materials that end up in everything from electric vehicles to fighter jets. China dominates rare earths production, controlling an estimated 85% of global processing capacity.

The U.S. is looking to break the Chinese monopoly. In July, the Defense Department struck a deal with MP Materials, the largest producer of rare earths materials in the Western Hemisphere, that included an equity stake, price floor, and guaranteed customer for all of the capacity MP plans to construct.

It was a game-changer for the industry. That was reflected in stock prices. Entering Tuesday trading, shares of MP Materials were up 431% year to date. Shares of other rare earths companies, USA Rare Earth, and Ramaco Resources, were up 175% and 365%, respectively.

JPMorgan analyst Bill Peterson called the Cliffs' quarter "solid," helped by strong automotive markets, but acknowledged the rare earths mention helped.

Cliffs' "rare earths [prospect] has yet to be proven as commercially viable, which will likely take time," wrote Peterson in a Monday report. "We feel the mention of rare earths largely fueled today's retail [investor] driven rally and together could keep shares elevated in the near term."

He rates the shares Hold and has a $13 price target for them. GLJ Research analyst Gordon Johnson rates the shares a Sell. His price target is $5.75 a share. He wasn't as sanguine about Cliffs' rare earths plans.

"The rare earths story is, at best, a decade away from producing anything of commercial value -- assuming the resources are even technically recoverable, which is far from certain," wrote Johnson in a Tuesday report. "This is classic market theater: throw 'rare earths' into a press release and hope investors forget the numbers. It worked -- at least for a day."

For now, Johnson is more focused on steel prices, which are down roughly $100 per ton from earlier in the year. Steel prices jumped in February after President Donald Trump announced tariffs on imported steel and aluminum.

Monday's "excess exuberance" also drove Wells Fargo analyst Timna Tanners to downgrade the shares to Sell from Hold. Her price target stayed at $11 a share.

"Enthusiasm over unknowns seems excessive," wrote Tanners on Tuesday. Along with rare earths plans, Cliffs referenced a memorandum of understanding with a global steel company on Monday, but details were thin. "We don't know of other deposits in [Cliff's ore] region, and would be skeptical of an attractive return, absent further information."

Overall, 27% of analysts covering Cliffs' stock rate the shares a Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Cliffs' stock is about $12 a share.

Being tied to the rare earths trade can also cut both ways. Rare earths stocks were down in Tuesday trading, falling after Monday gains that were catalyzed by a deal between the U.S. and Australia.

Trump and Australia's Prime Minister Anthony Albanese signed a critical minerals agreement designed to unlock more capital for the sector. Albanese, speaking alongside Trump during a meeting at the White House, said the deal included an $8.5 billion project pipeline.

MP stock was off 6.9% in morning trading on Tuesday. USA Rare Earth and Ramaco shares were down 15% and 14.9%, respectively.

Write to Al Root at allen.root@dowjones.com

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(END) Dow Jones Newswires

October 21, 2025 11:56 ET (15:56 GMT)

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