Sometimes the problem isn't that things are going badly. It's that they've already gone well, and now the good news is priced in. That's the situation facing Cleveland-Cliffs Inc. (CLF) according to KeyBanc Capital Markets analyst Philip Gibbs, who downgraded the steelmaker from Overweight to Sector Weight.

The company's most anticipated catalysts have already played out, Gibbs notes, and Cleveland-Cliffs is now dealing with modestly higher costs thanks to a richer product mix. In other words, the easy wins are behind them.

What Changed

The Cleveland-based steelmaker's valuation "now better embeds pending non-core asset sales and strategic joint ventures with POSCO (Korea's largest steelmaker) to re-engineer/deleverage the balance sheet," Gibbs wrote. While Cleveland-Cliffs could still strike an attractive deal with POSCO, there's limited visibility around the specifics, he added.

The numbers tell a tougher story. Gibbs slashed his fourth quarter EBITDA estimate from a $63 million profit to a $22 million loss, pointing to lagging spot pricing and modestly higher costs.

Looking further ahead, the 2026 EBITDA estimate dropped to $1.33 billion from $1.63 billion. The reason? Higher steel unit costs that reflect a richer mix of auto business and more finished steel shipments. That shift matters because Cleveland-Cliffs is replacing a roughly 1.5 million ton per year slab contract with ArcelorMittal SA (MT) that expires in December 2025.

Price Action: Cleveland-Cliffs shares fell 6.78% to $12.36 on Wednesday.