Market
November 11, 2024
Outlook for recycled metals in the new Trump era
Written by Lewis Leibowitz
Now that the dust has almost settled on the 2024 elections (as I write, the control of the House of Representatives is still uncertain), it’s time for a look at how the second Trump administration could affect recycling, especially recycled metals.
One of the most obvious impacts is on international trade policy. To a great extent trade policy will affect the role of imported materials in the U.S. economy, such as pig iron, semifinished aluminum, tungsten, copper and lithium. For raw materials that are plentiful in the United States, a change in environmental policy priorities will open avenues for such products as lithium ore and tungsten to compete more vigorously with scrap. On the other hand, tariffs that seem likely to increase will diminish the competitiveness of imported virgin materials.
Regarding national security considerations, I look for policies that will reduce dependence especially on China for certain metals like lithium and tungsten. Tariffs on Chinese imports will likely increase. It is an open question whether import restrictions on products from friendly countries will increase. Those positions are still forming, and the people who will be working those issues have not yet been selected. While policy is still being formulated, interests that are significantly affected have a chance to influence those decisions.
Each product has its own properties, advantages, and vulnerabilities. Two easy examples are steel and aluminum. Recycling of these products in the U.S. is a mature market. If finished steel and aluminum are hit with further restrictions (the current quota agreement with the European Union is scheduled to expire in March 2025 and tariffs on the EU could kick in again), the value of recycled metal could increase. Virgin material (such as pig iron) competes with scrap. As steel production moves more toward electric furnace production, which uses scrap as a major feedstock, the need for imported metal could decline. The companies that can most efficiently process scrap into usable form could profit handsomely.
Other materials are not available in sufficient quantity. Key examples are copper, tungsten, lithium and nickel. While mining of these metals could increase if environmental restrictions are relaxed, the lead time for these developments could take years rather than months. In the interim, recycled metals could help fill the gap and improve the competitiveness of U.S. companies that make finished goods from these raw materials (think austenitic stainless steel, copper wire, and lithium-ion batteries as examples).
Still to be determined, of course, is how the new administration will balance competing interests in the formulation of policy. Sticking with recycled materials alone, there are major decisions to be made.
For example, lithium batteries are critical in the manufacture of electric vehicles, and Trump ally Elon Musk owns Tesla, one of the largest makers of EVs. The government has imposed EV mandates to encourage the evolution of transportation away from internal combustion engines. Now, with the election of Trump and a possible Republican Congress, Trump will likely reduce government incentives (including subsidies) to encourage consumers to buy more EVs.
Changing environmental policy can be compared to turning an aircraft carrier—not easy and not quick. Major changes away from encouraging EV production will not only attract lawsuits from environmental activists and other groups; it may also cause a lobbying blitz from EV makers such as Mr. Musk.
Moreover, the supply chain situation confronting EVs is complex. China is a major supplier of lithium-ion batteries, no matter where the cars are produced. Putting tariffs on batteries from China will make production of EVs in the U.S. difficult or impossible. It will take time to develop alternate sources. In the meantime, recycling of lithium scrap can help make increased U.S. production of batteries possible. That is good for recycling.
Legal challenges to major changes (including across the board tariffs) are very likely, which could slow down their implementation. The current polarized situation in Washington could see bills stymied in Congress. In the Senate, current election results suggest that Republicans will have 53 seats, far below the 60 needed to defeat a Democratic filibuster. In the House of Representatives, while Republicans look very likely to retain their majority, it will not be much larger than the current ratio. That will create an opportunity for very few Republican holdouts to delay or even defeat legislation opposed by all Democrats.
Change is hard.
Recycling industries have a good story to tell, and both parties would do well to listen. Policy changes could encourage or discourage increased use of recycled metals. Given the uncertainty of specific policies at this point, the current situation demands attention and action to make sure wrong turns for the industry are minimized. The next few months will be critical.
Editor’s note: The views, thoughts, and opinions expressed in the content above belong solely to the author and do not necessarily reflect the opinions and beliefs of Recycled Metals Update or its parent company, CRU Group.
