The aluminum and steel industry, which affects businesses from beer to cars, reacted to the prospect of steep U.S. tariffs. President Donald Trump is expected to make the announcement on Thursday, and the move could have far-reaching effects. It may benefit U.S. steel producers, but also raises the possibility of retaliation from other countries and higher costs for American shoppers.
AK Steel and U.S. Steel are catching a bid in pre-market trading, while Alcoa and Century Aluminum indicated to open higher in U.S. trading. Investors should be cautious about chasing the price momentum in hot-rolled coil in the short-term, according to Citigroup Inc. analyst Alexander Hacking.
The big thing to watch will be trade retaliations, especially from China, and it’s possible that industries outside steel and aluminum will be hit, according to Societe Generale SA. “Collateral damage elsewhere is more likely a relevant factor than the direct impact to the metal industry,” said Christian Georges, an analyst at the bank. The tariffs will also drive up inflation for buyers of the metal. Imports account for 55 percent of U.S. aluminum demand and 35 per cent of steel, he said.
Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!
— Donald J. Trump (@realDonaldTrump) March 1, 2018U.S. aluminum premiums, a measure of the all-in price that consumers have to pay to get metal imported and delivered to their plants, are near a three-year high and will keep rising if Trump pushes ahead, Oliver Nugent, an analyst at ING Groep NV, said in an emailed note.
Any kind of trade restriction is damaging to business and will hurt the global economy, said Severstal PJSC, one of the biggest Russian steelmakers. However, the U.S. accounted for only 2 percent of the company’s sales, and it said the volume can be easily redirected to other markets.
Higher tariffs could cost thousands of U.S. jobs and raise costs for brewers by millions of dollars, said Anheuser-Busch InBev NV’s Chief Financial Officer Felipe Dutra. “About 2 million jobs depend on America’s beer industry. We urge the department of commerce and U.S. President Trump to consider the impact of trade restriction tariffs,” he said.