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US Steel Tariffs Will Hurt Some Asian Companies

Mar 14, 2018

Nomura said the recent imposition of tariffs on U.S. steel imports could cost more than some other Asian steel producers. After U.S. President Donald Trump signed 25% of steel import tariffs last week, South Korea's smaller companies are expected to suffer a bigger blow than their larger rivals, and Japanwill could suffer a slight impact, analysts said.

The company said on a note.

Smaller Korean steel companies may be more negatively affected than larger players because of their level of exposure to the United States. "POSCO has drastically reduced U.S. exports due to a series of anti-dumping and countervailing duties imposed over the past few years, while US current carbon sales are less than 1%,," said Nomura analyst Cindy. Parker said in a Friday note, Yin and Jinsong said.

Pune is Korea's largest steel producer.

For modern Steel, another big South Korean steelmaker, the US accounts for about 5% of total sales.

"The more obvious impact could be on companies like Xiamen, Husteel and Nexteel, which have a higher exposure to the US," analysts wrote.

According to Nomura, Japan's direct impact is expected to be limited, given that 1.8% of China's crude oil production and 1.5% of its steel production were exported to the United States last year.

These views are similar to what Moody's ratings agency said in a note last week, when it pointed out that the direct effect of tariffs was modest for South Korean steelmakers and low for other Asian countries.

The U.S. Department of Commerce's 2017 report said South Korea and Japan are the third and seventh largest sources of U.S. steel imports, as well as the two major sources of U.S. imports of steel from Asia.

Nomura's research argues that imports of steel from the European Union rank South Korea and Japan as the fourth and eighth largest source of U.S. steel imports. Steelmakers in the region were trading higher in Monday, recovering from losses recorded at the last session.

The Tokyo stock price Steel index rose 1.54% in the midday trade, with Japan's steel and Sumitomo Metal 2.3% and JFE's holdings up 0.53%. Elsewhere, South Korea's Posco and modern steel rose by 2.9% and 1.96% respectively.

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