Investing.com -- President Donald Trump’s decision to impose 25% tariffs on imported aluminum and steel, effective March 4, is expected to boost U.S. metal prices, with aluminum seeing a more sustained impact than steel, according to Wolfe Research.
Wolfe Research highlighted that the tariffs would apply to semi-finished and finished products but not scrap metal or alumina. While Trump stated there would be no exceptions, Reuters has reported a potential exclusion for Australia.
The U.S. aluminum market is structurally short, with 47% of demand met by imports and two domestic smelters recently shuttered, explained the firm.
Wolfe Research believes that Century Aluminum (NASDAQ:CENX) and Alcoa (NYSE:AA) stand to gain the most from rising aluminum prices.
“If the Midwest Premium (MWP) were to rise to the level of the 25% tariff year-over-year, we arrive at $0.45/lb from 2024’s average of $0.19,” said Wolfe Research.
They add that Alcoa and Century Aluminum have estimated a $146 million and $41 million respective benefit for every $100/ton (~$0.05/lb) increase in the MWP. This translates into an annualized benefit of nearly two times CENX’s 2024 EBITDA and 50% of AA’s.
For steel, the tariffs could push hot rolled coil (HRC) prices to $900 per ton from the current ~$775, but Wolfe Research expects prices to retreat in the second half of 2025 as domestic supply increases.
According to Wolfe Research, U.S. Steel, Steel Dynamics (NASDAQ:STLD), and Cleveland-Cliffs (NYSE:CLF) will likely see some benefit, while rebar producers like Commercial Metals and Nucor (NYSE:NUE) could gain from added trade protection.
Overall, Wolfe Research sees aluminum prices as "stickier" than steel and prefers Outperform-rated CENX and AA.