U.S. President Donald Trump's plan to impose new 25% tariffs on all imports of steel and aluminium into the United States weighed on shares of producers in Asia on Monday as it threatened to disrupt trade flows in the metals.
The tariffs, which Trump said would be announced on Monday and be in addition to existing duties, sparked warnings from steelmakers in Asia 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 government and American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminium.
In South Korea, the industry ministry said on Monday it held an emergency meeting with steelmakers in Seoul 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 (004020.KS), 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.
Hyundai Steel shares fell as much as 2.9% amid a broader decline among South Korean steelmakers.
"The negative impacts from the changes in tariffs would be unavoidable," said an official with Dongkuk Steel (460860.KS), noting that the U.S. is a profitable market for it now.
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 (.NIFTYMET) was that country's top sectoral decliner on Monday, down about 2.5%.
DEMAND THREATENED
The impact of the tariffs could be wide ranging.
"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.
Iron ore futures fell on Monday as the tariffs threat triggered risk-off sentiment despite evidence of recovering demand in top buyer China, while aluminium was up narrowly on what one analyst said was concern that supply could tighten.
"One of the impacts of these tariffs is depressed global economic activity," said Kyle Rodda, senior financial markets analyst at Capital.com in Melbourne.
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.
Shares of Australia's BlueScope Steel (BSL.AX), however, rose to a more than two-month high on Monday, buoyed by expectations that its U.S. business would gain from the tariffs.
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.
