Biggest risk from US metal import tariffs is retaliation

Bloomberg

While US steel and aluminum producers surged after the Commerce Department released its recommendations for restricting imports, a muted reaction among the biggest Asian metals stocks suggests the international impact will be spread thinly—unless US action prompts retaliation from its biggest suppliers.
Japan’s top steelmakers, Nippon Steel & Sumitomo Metal Corp. and JFE Holdings Inc., and its largest maker of aluminum products, UACJ Corp., all rose in Tokyo, while Posco, South Korea’s biggest steel mill, fell slightly. The reactions came as President Donald Trump’s administration weighs tariffs as high as 53 percent on steel and 23.6 percent on aluminum.
The proposals risk a chain effect under which restrictions on US imports encourage other nations to impose duties—top producer China has already warned as much—or divert shipments to alternative markets, SMBC Nikko Securities Inc. said in a note. Still, the direct impact on Japanese steelmakers should be limited given the small volumes the country sends to the US, the brokerage said.
The aim of the tariffs is to boost US output to at least 80 percent of capacity by cutting steel imports by 13.3 million metric tons and aluminum imports by 669,000 tons, according to the Commerce Department.
Those volumes represent less than 1 percent of world steel supply outside the US, and about 1 percent of aluminum output.
Some smaller companies did see more significant gyrations in their shares. In South Korea, SeAH Steel Corp., which sells pipes to the US, dropped as much as 7.6 percent, while Japan’s Yamato Kogyo Co. gained as much as 8 percent because of its large US operation that would be untouched by duties. The impact on other producers such as Luxembourg-based ArcelorMittal and Brazil’s Gerdau SA would also be cushioned by their significant US businesses.
South Korea is one of 12 countries, including China, that could be subject to the higher steel tariff, but which excludes Japan and Canada, the top supplier to the US. A second option presented by Commerce would be a duty of 24 percent on all countries.
For aluminum, Trump’s options also include a higher tariff, of 23.6 percent, on five major suppliers including China and Russia. The other possibility is an across-the-board levy of
7.7 percent.
There’s a risk that more Chinese aluminum will flow into Asian markets, weighing on prices, if the US blocks imports from the top producer, a spokesman for Japan’s UACJ said. Broad restrictions on imports would result in lower aluminum prices in China and on the London Metal Exchange, while lifting premiums in the US, Goldman Sachs Group Inc. said.