Shares of U.S. steel, aluminium companies surge pre-market

By Hyunjoo Jin and Tony Munroe

(Reuters) -Donald Trump's plan to impose new 25% tariffs on steel and aluminium boosted share prices of U.S. producers in pre-market trading, while shares of producers abroad fell, with traders citing worries of disrupted flows and a reduction in demand.

The tariffs, which Trump said would be announced on Monday and be in addition to existing duties, sparked warnings from Asia and Europe about the impact on prices, profitability and volumes and broader worries that they could push up inflation and drag on economic activity.

Canada, Brazil, Mexico, South Korea and Vietnam are the biggest sellers of steel into the U.S., according to American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminium.

Shares of U.S. producers of the two metals jumped in premarket trading with the biggest U.S. steelmaker Nucor surging 9.5% and Century Aluminum advancing by 8.5%.

In other countries, shares of producers dropped, with the world's second-largest steelmaker ArcelorMittal down 2.2% and South Korea's Hyundai Steel losing as much as 2.9% amid a broader decline among South Korean steelmakers.

The European Commission said on Monday it would react to protect EU interests while the South Korean industry ministry held an emergency meeting with steelmakers to discuss measures to minimise the impact of potential tariffs.

"We are concerned that the potential change would lead to export price hikes and reduction in the 70% quota volumes," said an official at Hyundai Steel, referring to South Korea's annual duty-free steel quota of 70% of volumes shipped to the U.S. on average from 2015-17, agreed during the first Trump administration.

The company, which supplies steel to Hyundai and Kia's car plants in the U.S., has said previously that it was considering building a new steel plant in the U.S. to blunt the impact of potential Trump tariffs.

Chu Xinli, an analyst at China Futures, said U.S. demand would be reduced by higher prices and slower inflows of steel, which is used in automaking, appliances and construction.

"Those that are poised to flow into the U.S. will be redirected to other countries and regions, such as the EU and Asian countries, which will see a change in the global steel trading pattern," Chu said.

India's metals index was that country's top sectoral decliner on Monday, down about 2.5%.

DEMAND THREATENED

The impact of the tariffs could be wide ranging.

The tariffs would lift metals prices for U.S. industrial customers, reflected in a 9.9% jump to the highest since July 2022 in the premium paid over benchmark exchange prices for primary aluminium in the United States.

"I suspect U.S. manufacturers will have to wear higher prices as a result of these 25% tariffs. Its import reliance is high, around 40%-45% for aluminium and 12%-15% for steel," said Daniel Hynes, senior commodity strategist at ANZ in Sydney.

Some aluminium that usually would move to the United States would be redirected to Europe, which would depress physical premiums in that region, a trader said.

The measures would "lead to further volume diversions to Europe, which will further increase the already existing import pressure due to overcapacity from China and many other countries," said Olaf Reinecke, president of the German Steel Association and CEO of Salzgitter.

Some countries were making the case for exemptions from Trump's tariffs.

Australia's trade minister said its steel and aluminium exports to the U.S. create "good paying American jobs" and are key to shared defence interests, as Canberra presses Washington for a tariff exemption.

Charu Chanana, chief investment strategist at Saxo in Singapore, said slower demand could counter the potential inflationary impact of the tariffs.

"The bigger concern is the uncertainty and the shift towards a more protectionist world," she said.

(Reporting by Hyunjoo Jin in Seoul, Amy Lv in Beijing, Tony Munroe in Singapore, Kirsty Needham and Renju Jose in Sydney, Asia bureaus, Tom Kaeckenhoff in Duesseldorf and Eric Onstad in London; Editing by Muralikumar Anantharaman, Veronica Brown and Peter Graff)