By Arunima Banerjee and Sruthi Shankar
(Reuters) - Shares of U.S. steel companies surged on Thursday while those in major manufacturers dipped on speculation that President Donald Trump was preparing to announce hefty tariffs on imported steel to protect domestic producers.
An early morning tweet from Trump said that the steel and aluminum industries needed "free, fair and smart trade", adding to expectations he would announce tariffs on foreign imports but stopping short of any announcement.
Shares of AK Steel Holding Corp (N:AKS) jumped as much as 12 percent before trimming those gains to around 7 percent, while those of U.S. Steel Corp (N:X) rose 6 percent. Nucor Corp (N:NUE) and Steel Dynamics Inc (O:STLD) both gained around 2 percent.
A raft of U.S. industrial companies who are major consumers of steel, including Caterpillar Inc (N:CAT), Boeing (N:B) and tractor maker Deere & Co (N:DE) saw their shares fall by almost 2 percent.
Most would face greater costs if Trump forced the price of imported steel, and with it prices of domestically-produced metal, higher.
The industrial metal companies, the domestically focused ones, are probably going to benefit from this," said Art Hogan, chief market strategist at B. Riley FBR in Boston.
"In the longer run we’ve seen that tariffs generally don’t work and actually they generally hurt the economy. In the immediate to longer run it's probably seen as a step towards trade wars (and) retaliation. Negotiations with Nafta could break down over this."
CNBC cited an unidentified White House official as saying Trump was set to announce tariffs at 11 a.m. (1600 GMT) on Thursday, but also said that officials did not say what the president would specifically announce.
Reuters reported late on Wednesday that several top U.S. steel and aluminum executives had been invited to the White House on Thursday for what could be a major trade announcement.
Trump has vowed to take steps to crack down on imports of steel and aluminum and has been considering imposing hefty tariffs on imports of the metals from China and other countries.
The U.S. Commerce Department recommended last month that Trump impose steep curbs on steel and aluminum imports from China and other countries ranging from global and country-specific tariffs to broad import quotas.