Election stakes: Steel, scrap and the future of trade

This is our last newsletter before election day. The question that is being promulgated is how will the outcome affect the ferrous scrap and steel sectors. These two industries have many issues in common. But there are a few on which they may have opposite views.

The two acts passed by the Biden Administration – the Infrastructure Act and the Inflation Reduction Act (IRA) – were thought to have benefits to the steel business and, subsequently, the scrap sector. A Harris Administration would follow through on implementing this legislation. A Trump Administration has not said much about the infrastructure bill but has endorsed rebuilding the infrastructure of the country in previous campaigns. However, Trump has repeatedly called emissions and global warming a hoax. This could mean the IRA and all the work and investment with has gone into decarbonization could be dismantled, underfunded or extremely deprioritized. This would have a negative effect on steel, scrap and other industries.

Another concern is tariffs, quotas and other trade restrictions. I know both parties have supported the Section 232 and 301 tariffs on steel and aluminum, especially in an election year. However, the Trump admin wants to levy widespread tariffs on many nations (friend and foe) and many products to raise revenues so the income tax could be eliminated has raised concern among economists. In a competitive world with the U.S. in first place on an economic basis, taking a chance with this drastic transition may be a risky venture.

Moreover, past indications suggest this approach may not achieve the intended results.

Other countries may retaliate, and it may sow disharmony and resentment throughout the globe. Our long-time partners would turn into our rivals and play into the hands of our enemies. This is where the two parties disagree. Trump has doubled down on this while Harris supports tariffs as needed to protect certain industries.

For the scrap industry, using tariffs and quotas on steel imports has basically been neutral for the business over the last several years. The steel industry has realized most of the gains with wide margins between the price of scrap and finished steel.

The latent concern with a Trump Administration could be an evolving atmosphere within government where these trade restrictions are seen as a cure for what ails us. This could lead to putting restriction on the scrap trade mainly in the export arena. This has happened before and has been discussed over the last several decades. This would assist the steel business in keeping a lid on scrap prices, but would limit opportunities for the scrap industry.