Higher domestic steel prices along with increased premiums for aluminum are expected after President Donald Trump ordered a 25% duty on all steel and aluminum imports, analysts at Morgan Stanley said in a Tuesday research note, adding that US-based steelmakers and aluminum producers stand to benefit from the removal of prior exemptions and quotas granted to certain countries.

The tariffs are expected to take effect on March 4 and will apply to all imports of the industrial metals into the US, removing previous exemptions provided to steel and aluminum arriving from Canada, Mexico and Australia and dropping quotas used for Brazil and the European Union, the analysts said.

Among individual companies, Alcoa (AA) is a likely beneficiary of aluminum tariffs rising to 25% from 10% previously, particularly due to its domestic smelting business, the analysts said.

Steel companies with sizable US operations - including Cleveland Cliffs (CLF), Commercial Metals (CMC), Gerdau (GGB), Nucor (NUE), Steel Dynamics (STLD) and US Steel (X) - likewise will receive an immediate boost from the removal of prior exemptions and quotas and from domestic prices rising, Morgan Stanley analysts said. The tariffs also may spur those companies to take advantage of currently under-utilized capacity, along with new and planned production capabilities, to limit the effect of the higher prices on consumers, they said.

Still unknown, however, is whether the other countries, particularly Canada and Mexico, will retaliate with tariffs of their own, which could result in "specific consequences for some companies under our coverage," the analysts said.

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