NUE Nucor Corporation

By Amrith Ramkumar and David Hodari 

Shares of companies that produce steel and aluminum swung before closing higher Friday, a day after rising on the official announcement of U.S. tariffs on the metals.

U.S. Steel Corp. reversed its early losses and closed up 1.4%, while Nucor Corp. rose 0.5%. Meantime, Alcoa Corp. closed up 1% and Century Aluminum Co. added 2.3%. Although analysts have said they expect U.S. premiums on the two metals to increase, supporting domestic producers, some think the long-term effects are uncertain if global demand slows and the market adjusts.

"I think it could potentially slow it down from a longer-term perspective," said Ed Egilinsky, managing director and head of alternative investments at ETF and mutual fund issuer Direxion Investments.

China, the country analysts think will be affected most by tariffs, is the world's largest consumer of a wide range of commodities.

Some investors and analysts have said they are waiting to see the specific details of the tariffs next week to determine the full impact. Others are monitoring the prospect of other countries retaliating and waiting to see how countries like Canada and Mexico might be impacted as talks about overhauling the North American Free Trade Agreement continue.

For now, some analysts think the effects will be contained in the U.S.

"If you look at Chinese exports to the U.S. last year, it's not that high on the list -- the U.S. was the 11th largest recipient," said Xiao Fu, head of commodities research at BOCI Global Commodities. "[The move] is more likely to affect U.S. regional premiums."

U.S. hot-rolled steel coil prices have risen to about a seven-year high recently, boosted in part by news of the tariffs, and rose 0.7% Friday to $800 a ton. Aluminum prices on the London Metal Exchange were slightly higher for the second straight session Friday.

Elsewhere in base metals, front-month copper for May delivery edged down less than 0.1% to $3.1010 a pound. The industrial metal has fallen from roughly four-year highs hit in late December alongside oil, stocks and other risky investments.

Among precious metals, gold prices rose from their lowest level of the year on Friday, as investors bought assets considered to be safe stores of value following the tariffs amid worries that they could spark a trade war and contribute to higher inflation. Gold for April delivery climbed 1.2% to $1,320.20 a troy ounce on the Comex division of the New York Mercantile Exchange.

Front-month gold for March delivery rose 1.4% to $1,321.10 a troy ounce on the Comex division of the New York Mercantile Exchange, its best day since Feb. 14.

Some analysts have said higher-than-expected consumer prices -- as it becomes more expensive for companies to manufacture goods -- could force the Federal Reserve to raise interest rates faster than expected and contribute to an economic slowdown.

"The market doesn't digest uncertainty too well, that's why you're seeing a negative reaction," Mr. Egilinsky said.

A weaker dollar was also boosting commodity prices by making raw materials cheaper for overseas buyers. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, was down 0.3%.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

March 02, 2018 17:02 ET (22:02 GMT)

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