Cleveland-Cliffs (CLF) was a top bullish price surprise on Monday, up 16.34%. The steel producer is having a moment after delivering stronger Q3 2026 results.
If you’re thinking about jumping on the bandwagon, I’ve got several reasons to think twice, chief among them the lack of leadership from its CEO, Lourenço Gonçalves.
Don’t Miss a Day: From crude oil to coffee, sign up free for Barchart’s best-in-class commodity analysis.
While there is no question that the third quarter results were an improvement over last year -- revenues of $5.61 billion, 18.5% higher than Q3 2025, and adjusted net income per share of $0.28, considerably higher than a year ago when it lost 45 cents -- that’s come at the expense of U.S. consumers and businesses.
The steel industry, like any other, must survive on its own merits, not on price supports and product shortages caused by tariffs. I have little confidence in Cleveland-Cliffs’ ability to sustain this run.
If you bought in the past month and are up double digits, I wouldn’t hesitate to take profits. Life will get a whole lot harder for CLF once the midterms are over in two weeks.
Here’s why.
The CEO Who’s Delivered Little For Shareholders
Lourenço Gonçalves was appointed CEO of Cliffs Natural Resources Inc., the predecessor to Cleveland-Cliffs, on Aug. 7, 2014. The Brazilian-born engineer began his career at Companhia Siderurgica Nacional (SID), where he spent 17 years in operations, sales, and R&D. He moved to the U.S. in 1998 to become CEO of California Steel Industries, now 51% owned by Nucor (NUE) and 49% by JFE Holdings.
From there, he moved into several senior and CEO roles at U.S. steel companies, leading to his appointment as Cleveland-Cliffs’ chief executive in 2014.
There is no question that Gonçalves has the steel industry experience (45 years) to be CEO. That’s not in dispute.
The problem is that since taking the top job 12 years ago, shareholders have seen zero returns, including dividends, and if you take out yesterday’s big jump, they’re in the red over one of the most successful bull runs in U.S. history.
Sure, the U.S. steel industry has had a tough two decades, but that hasn’t stopped Nucor from delivering a 538% total return over the same period.
If you want to buy what Gonçalves is selling, go ahead, but if you must own a steel stock, the smarter move is to buy NUE or its able competitor, Steel Dynamics (STLD).
In my opinion, this man has overstayed his welcome.
Good Leadership Never Blames Others
Gonçalves and the board paid $2.5 billion in cash and stock to acquire Canadian steel producer, Stelco, on Nov. 1, 2024.
Here’s what the CEO had to say at the time:
“We did this deal the way it should be done, reaching a respectful agreement between the two parties that keeps national interests at the forefront and recognizes the importance of the workforce,” Gonçalves stated in the press release announcing the completed acquisition.
“The enterprise value of this transaction is significantly lower than the cost of building an equivalent replacement mill in the United States, and the cost structure is lower than what a new U.S. mill would provide us.”
Setting aside the cross-border implications for a moment, the deal doubled Cleveland-Cliffs’ net debt from $3.41 billion at the end of 2023 to $7.75 billion at the end of 2024. As of Q3 2026, it is $7.56 billion, only slightly lower, and nearly 100% of its market cap, compared to 7.5% for Nucor.
Why would you make such an acquisition if you didn’t really feel you were buying a company worth owning?
As you probably know, Gonçalves now has buyer’s remorse and blames the Canadian government for his problematic acquisition.
“‘We did not expect, less than two years after acquiring the company, to be treated like a pariah,’ Goncalves said Thursday in an interview on BNN Bloomberg Television. ‘If that’s what Canada will do to attract foreign investment into Canada, I don’t think they will be very successful,’” Bloomberg reported Oct. 15.
Now, if these words came from a CEO who had delivered for shareholders over the past 12 years, I would be more sympathetic. Sadly, that’s not the case.
Cleveland-Cliffs, through its Stelco subsidiary, said on Sept. 28 that it would lay off 333 employees at its Hamilton, Ontario, plant, and another 50 at its Nanticoke, Ontario plant.
Yesterday, in announcing the company’s Q3 2026 results, Gonçalves boasted about Stelco’s success.
“‘Third quarter was Stelco’s strongest ... since we acquired the company two years ago. The Canadian hot-rolled market has improved substantially,’ Cleveland-Cliffs CEO Lourenco Goncalves said in a statement Monday.
“‘However, more needs to be done by the Canadian government to correct a clearly oversupplied market for galvanized steel in Canada,’” the CBC reported Tuesday.
If he knew this was the case in the Canadian market, why did he go ahead and spend $2.5 billion on Stelco? Honestly, I don’t think he knows. Either that or Cleveland-Cliffs purposely bought Stelco to shutter it.
Either way, blaming Canada for your poor decisions isn’t the calling card of strong leadership. On this alone, I would avoid owning CLF stock at all costs.
What Happens If Tariffs End?
Currently, hot-rolled and galvanized steel imported into the U.S. faces a 50% tariff. That reduced Canadian steel imports into the U.S. by 60% in 2025, and it hasn’t improved in 2026.
With reduced competition, Goncalves said yesterday, “We are currently selling steel under the best price environment in three years.”
Great.
And consumers and businesses, especially the agriculture industry, have suffered as a result. This is robbing Peter to pay Paul. It’s unsustainable.
Which brings me to the CEO’s most damning comment.
“‘These are the prices we need to run a thriving business that grows employment, pays its workers well, reinvests in people and equipment, and protects our critical supply chains and national defence,’” the CBC reported.
So, several thoughts come to mind.
First, Goncalves suggests he has no idea how to profit without high steel prices. If high prices are your competitive edge, you have no moat. That’s warning one.
Two, what happens if the Democrats take control of both the House and Senate two weeks from today? While it’s quite possible Democrats also favor some type of import tariffs on Canadian steel, I hesitate to think they would be at 50%.
Third, going back to Cleveland-Cliffs’ $2.5 billion acquisition, why in god’s name would you spend that kind of money only to completely reverse course two years later?
This is a disingenuous CEO who cares little about Canadian steelworkers. If I were a U.S. steelworker at CLF, I would be very worried that he and the board would have no problem flipping again in two years should the political waters change.
That is not how you run a business.
Run as fast as you can away from CLF stock. As I said, there are much better alternatives within the same industry and hundreds more outside of it.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Cleveland-Cliffs Stock Surges, But Long-Term Concerns Loom Newmont Mining Earnings Play: Profiting from Volatility with a Naked Put U.S. Copper Stockpiles Have Surged: Could the 2025 Price Collapse Repeat? What Were Markets Telling Us at Friday's Close?