Tariff Turmoil: Cleveland-Cliffs, Constellium, Freeport-McMoRan Caught In The Crossfire, Says Analyst

President Donald Trump's fresh round of 25% auto import tariffs is shaking up the metals market, and JPMorgan analyst Bill Peterson sees near-term headwinds for key players in steel, aluminum, and copper.

While domestic production incentives should help Cleveland-Cliffs Inc. CLF and Constellium SE CSTM in the long run, rising costs and inflationary pressures could stifle demand.

JPMorgan's U.S. Auto team expects vehicle prices to climb another 5%, with core PCE inflation now forecasted at 3.1% this year. The hit to real consumer spending has also led JPMorgan's economists to trim GDP growth estimates to 1.3% for 2024.

Copper Tariff Chatter Heats Up

The tariff storm doesn't stop with autos. Reports indicate Trump is eyeing a 25% tariff on U.S. copper imports, possibly rolling out within weeks—well ahead of the November deadline.

This coincides with Glencore PLC's GLNCY force majeure at its Altnorte refinery in Chile, a major supplier to the US. Copper miner Freeport-McMoRan Inc FCX is positioned to benefit, with COMEX copper trading at a 15% premium to LME.

JPMorgan recently upgraded FCX to Overweight, seeing a 15% upside to its FY25 EBITDA, citing its defensive balance sheet and capex flexibility.

Short Sellers Smell Blood

Uncertainty has drawn in short sellers. Cleveland-Cliffs's short interest has spiked to a one-year high of 12.1%, while Carpenter Technology Corp CRS saw a rise to 7.5%. With ‘Liberation Day' on Wednesday expected to bring another tariff barrage, volatility looms large.

However, JPMorgan remains bullish on select metals stocks, reaffirming its Overweight rating on FCX. As Peterson puts it, "FCX as a value/defensive play relative to growth-focused peers given its tenured management team, clean balance sheet, and capex optionality."

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