Cleveland-Cliffs (NYSE: CLF) stock is getting tossed into the scrap pile today. The steelmaker reported third-quarter earnings last night, and results came up short of expectations. Analysts expected the company to report a loss, but its adjusted loss of $0.33 per share was worse than expected.

Revenue also came up short, and investors knocked the stock lower by 9% as of 11:10 a.m. ET. Cliffs also announced that it closed the acquisition of Canadian steel company Stelco on Nov. 1.

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With today's drop, Cliffs stock is down by 40% so far this year.

Steel demand is the problem

A drop in demand, most notably in the automotive sector, has led to lower steel prices and hurt the company's margins. Cleveland-Cliffs CEO Lourenco Goncalves is pushing investors to look ahead, though, stating, "We expect steel demand to rebound in early 2025, supported by a number of economic and political factors."

Lower automotive demand is particularly painful for Cliffs. Nearly one-third of its product shipments in the third quarter went directly to the automotive sector.

The company isn't alone in seeing lower sales sequentially in Q3 compared to the prior quarter. North America's largest steelmaker Nucor also recently reported its sales were lower by 8% quarter over quarter. By comparison, Cliffs saw a 10% drop in its revenue.

In addition to expectations of a rebound in demand, Goncalves said the addition of Stelco will help diversify its customer base with less automotive exposure. But the automotive sector will still be critical for Cleveland-Cliffs. Nucor is more levered to the construction industry with its product mix.

With infrastructure spending picking up and construction of data centers and semiconductor chip fabs rising, investors would likely be better served to own Nucor over Cliffs. Investors will still have to endure the cyclical nature of the business, though.

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