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Trump imposes 25% tariffs on steel, aluminium imports

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U.S. aluminium premium surges 25% since Friday

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Domestic smelters will struggle to meet U.S. demand

(Recasts with market reaction, U.S. metal prices, premiums)

By Eric Onstad

LONDON, Feb 11 (Reuters) - Prices of industrial metals

in the United States extended gains on Tuesday, reflecting the

impact of U.S. President Donald Trump's 25% tariffs on steel and

aluminium as industry will struggle to source enough domestic

material.

While the stated goal of the new tariffs is to aid

struggling U.S. metal producers, it will take time to reopen

closed plants and build new ones to make up for large amounts of

imports.

In the meantime, traders are marking up U.S. metals prices

to reflect the price automakers and other industries will have

to pay for foreign metal when the measures take effect on March

12.

The biggest impact will be on aluminium, used in transport,

construction and packaging, with net imports accounting for

around 82% of U.S. requirements, according to Morgan Stanley.

The U.S. aluminium premium over the global benchmark

on the London Metal Exchange has shot up by a quarter

since Friday to 35 cents per pound and has surged by 60% since

Trump was elected.

"Aluminium capacities would have to be massively expanded in

a short period of time to replace even a portion of the imports

with domestic production," said analyst Volkmar Baur at

Commerzbank.

The American Primary Aluminum Association praised Trump for

the tariffs.

"Today is a great day for the U.S. aluminum industry," said

Mark Duffy, president of the association.

But domestic aluminium smelters produced only 670,000 metric

tons of the metal last year, down from 3.7 million in 2000,

while U.S. demand was 4.3 million tons, U.S. data showed.

About 470,000 tons of U.S. production has been curtailed,

and could in theory restart, said Amy Gower at Morgan Stanley.

"But this would take at least 6-12 months in our view,

depending on how much preparatory work has been done."

Building new smelters would likely take even longer, she

added.

"I don't think anyone in the U.S. is more in favour of

increasing domestic aluminum production than me, but it has to

be done thoughtfully over several years," said Brian Hesse, CEO

of New York-based PerenniAL.

"You can't cut your nose off to spite your face," added

Hesse, whose company distributes slab, wire rod and billet

produced with aluminium used in products such as wheels and

window frames.

STEEL, COPPER

The U.S. imports about a quarter of its steel, and domestic

prices for U.S. hot rolled coil steel, a semi-processed

product, have jumped by nearly 40% since last Thursday.

"Supply growth would not offset these volumes in most

products, resulting in materially higher U.S. prices, if

implemented," said analyst Andrew Jones at UBS.

"The larger impact could be the negative impact on growth

from an escalating trade war."

Wider fears about slower economic growth and metals demand

due to a possible trade war were reflected in a broad retreat in

global industrial metals prices on Tuesday.

While Trump did not impose tariffs on copper on Monday,

he did threaten duties on the metal last week.

Expectations that copper would be next propelled the premium

of U.S. futures traded on Comex over the global benchmark

on the London Metal Exchange to a record peak on Monday.

It pulled back slightly on Tuesday to $725 a ton from $930

at the close on Monday, but it is still roughly double its level

at the end of January.

(Additional reporting by Tony Munroe in Singapore, Ernest

Schneider in Houston, Melanie Burton in Melbourne, Hyunjoo Jin

in Seoul, Amy Lv in Beijing and Francesco Guarascio in Hanoi;

Editing by Kate Mayberry, Veronica Brown and Christina Fincher)