TOKYO, Aug 23 (Reuters) - Shares in Japanese steelmakers firmed on Friday a day after the U.S. government exempted another 178 steel products from special tariffs it imposed earlier this year, although analysts said the effect on companies' profits would be negligible.
Shares in Japan's top steelmaker, Nippon Steel Corp , ended up 3.59 percent at 173 yen, after surging as high as 178 yen. Third-ranked Kawasaki Steel Corp firmed 1.37 percent to 148 yen.
The iron and steel sector subindex rose 1.91 percent, outperforming a 0.54 percent rise in the benchmark Nikkei average .
"Nippon Steel is a classic cyclical stock that has not done well recently and was due for a rebound, so the steel tariff news may have provided a needed spark," said Hakan Hedstrom, Head of Investment Management at Commerz International Capital Management.
Nippon Steel shares are still down 30 percent so far this year, as shaky domestic demand and severe price competition from Chinese and South Korean rivals have weighed on profits and discouraged buyers.
The United States had been under strong pressure from Japan, the European Union and other trading partners to exclude a large number of steel products from the disputed "safeguard" tariffs, which President George W. Bush imposed in March to prop up the ailing U.S. steel industry.
Equivalent to a total of around 53,000 tonnes, 23 of the 178 exemptions would benefit Japan, a Japanese embassy aide in Washington said.
The exemptions cover 25 percent of Japan's exports to the Unites States in 2001, he added.
But analysts said the effect on Japanese steelmakers' profits was uncertain.
"At around five percent, the percentage of Japanese steel exports that go to the U.S. is very small, so the effect of these steel tariff exemptions on profits will be quite negligible," said a fund manager who declined to be identified.
"More important is how China reacts to this move," he added.
In May, following on the heels of the U.S. decision, China slapped provisional tariffs of up to 26 percent on imports of nine different steel products, triggering concerns of a full-blown international trade war in the sector.
Major Japanese steelmakers said in July they would voluntarily reduce exports to China of certain steel products, hoping to prevent Beijing from imposing full-scale import curbs.
Steel exports to the growing Chinese market are twice those to the United States, and Japanese makers are looking to that market to boost flagging sales.
Analysts say one key in Japanese steelmakers' struggle to return to profitability will be whether they are successful in negotiating with domestic automakers such as Toyota Motor Corp for a price hike in sheet-metal prices.
South Korea is the largest export market for Japanese steel.