KLKNF Kloeckner and Co Ag Duisburg Namen Akt (PK)

By Nina Trentmann 

European steel producers and traders are divided about President Donald Trump's plan to impose steep tariffs on the commodity.

Mr. Trump on Thursday pledged to introduce tariffs of 25% on steel and 10% on aluminum imported to the U.S. to address what he described as a trade imbalance benefiting other countries. Foreign-owned companies that produce steel in the U.S. or use local steel generally welcomed the measures while companies that produce steel outside the U.S. and export their products to the country criticized the measures.

Steel trader Klöckner & Co. SE, based in Duisburg, Germany, said it expects the measures to boost earnings at its U.S. unit.

"This is good...when steel prices go up, so does our gross profit," Chief Financial Officer Gisbert Rühl said in an interview.

Higher steel prices benefit companies like Klöckner because steel traders charge their customers a slight markup on the market price of the commodity for their services. Klöckner generates annual revenue of around $3.5 million in the U.S.

In contrast, European industry groups criticized the planned levies.

"The U.S. is establishing a trade barrier with which it isolates itself from global steel imports," said Hans Jürgen Kerkhoff, president of Germany's steel association Wirtschaftsvereinigung Stahl, in a statement. The measures "clearly" violate World Trade Organization rules and must be challenged by the European Union, Mr. Kerkhoff said.

EU producers exported around 5 million metric tons of steel to the U.S. in 2017, said Axel Eggert, director general of European steel industry group Eurofer. "EU steel exports to the U.S. will be severely hit," he said in a statement.

Both supporters and opponents of the measures are waiting for detailed guidelines on the tariffs, which are expected next week.

"We are assessing the potential impact" on our operations, a spokesman for ArcelorMittal SA said Friday.

The Luxembourg-based company is one of the largest crude steel producers in the U.S. and in the past said there would "likely (...) be a positive impact" if the U.S. government imposed tariffs on imported steel.

The steelmaker employs around 18,000 people across 27 sites, including mines and mills, in the U.S. and produced 14.2 million metric tons of crude steel in the country last year. That exceeds the 3.8 million metric tons of steel ArcelorMittal made in Mexico and 5.7 million metric tons it made in Canada.

ArcelorMittal exports some of that steel to the U.S. and could face proposed tariffs, the spokesman said. "This all depends on the formal announcement and on which products are affected," he added. ArcelorMittal generated revenue of $18 billion in the U.S., Canada and Mexico in 2017.

Thyssenkrupp AG, an Essen, Germany-based steel company, said its direct exposure to the new tariffs will be limited. The company exports to the U.S. only a small share of the 11.4 million metric tons of steel it makes, a spokesman said.

Russian steelmaker PAO Severstal previously said it would reroute the steel it exports to the U.S. to other countries in response to import duties. "We will not experience any difficulties in redirecting these volumes to other markets," a spokeswoman said.

"At the same time, we are convinced that trade restrictions affect the global economy and are a 'lose-lose' for all trade participants," she added. The company sold about 2% of its total crude steel production of 11.7 million metric tons to customers in the U.S. in 2017.

German steelmakers are worried about the potential market reaction to tariffs. Around 13 million metric tons of foreign steel might end up in Europe instead of the U.S., said Mr. Kerkhoff of Wirtschaftsvereinigung Stahl. "If the EU does not take action, our steel industry will pay for the U.S.'s protectionism."

Voestalpine Stahl GmbH, a Linz, Austria-based steel and industrial products maker, said it doesn't expect to be affected by the measures. Voestalpine produces in the U.S. a large portion of the steel that it sells in the country.

However, the broader impact of U.S. tariffs is unknown, the company said in a statement. "The potential consequences for global markets and free trade cannot be estimated," Chief Executive Wolfgang Eder said, according to the statement.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

(END) Dow Jones Newswires

March 02, 2018 15:50 ET (20:50 GMT)

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