US manufacturers see higher metal prices as tariffs near

By Timothy Aeppel

(Reuters) - The price of the steel Glen Calder buys for his small machinery factory in South Carolina has spiked over 15% in the last two weeks, while Brian Nelson’s factory halfway across the country in Illinois can’t get its suppliers to quote him current prices at all.

"They’re waiting for the tariffs," said Nelson.

While President Donald Trump’s 25% tariffs on steel and aluminum are only slated to start on March 12, the action is already reverberating through the network of producers and builders that rely on the metals to make their goods. And not in a good way.

Trump campaigned on a promise to use tariffs to boost domestic manufacturers and also eyes the added revenue as a way to offset lost inflows to federal coffers from his planned tax cuts. But levies on imported steel and aluminum, while aiding U.S. mills by allowing them to raise their own prices, quickly translate into higher prices for the layers of producers who buy and process those metals into refrigerators, cars and combines.

Steel prices in the U.S. have surged in recent days, adding to gains since Trump became president. Hot rolled coil prices in the Midwest have jumped 12% to $839 per short ton during the two weeks to Thursday and climbed 20% since Trump took office on January 20, according to data provider Fastmarkets.

By contrast, the price of that type of steel has risen only 6% in northern Europe and was barely changed in eastern China since January 20.

A new survey by Bain & Co. found 40% of chief operating officers and other top executives are anticipating double-digit increases in their input costs due to tariffs, while about 80% are either revising or considering revising financial forecasts to account for the added costs. Forty-five percent of respondents to the survey were in the U.S.

Leon Topalian, CEO of top U.S. steelmaker Nucor, early this month praised Trump’s tariff plans, calling it the first steps in "his America First Trade Agenda." Nucor last week raised hot rolled coil prices for the fourth time since the start of the year.

'MIDDLE GUY IN THE SANDWICH'

Buyers typically acquire metals either straight from mills or through so-called service centers, smaller businesses that buy in bulk from mills and process metal into forms needed by buyers, such as cut to specific lengths.

Nelson, the CEO of HCC in Mendota, Illinois, buys both ways. But at the moment, he hasn’t been able to get price quotes from his usual sources. His senior buyer told him the mills have canceled orders, put orders on hold, and increased lead times due to tariff uncertainty. "Lead times are getting pushed out," he said, "because now customers are going crazy, panic buying."