Market awaits next direction

The upward momentum seen in the value of recycled steel in the first quarter stalled in April. The bull market was not entirely enjoyable for scrap processing firms, since a lack of supply throughout the winter coupled potentially higher margins with lower overall volumes.

On the scrap generation front, recyclers are keeping an eye on their scales and industrial buying volumes to determine how a flurry of policies from the Trump administration is affecting material flows this spring. U.S. processors and traders doing business in Canada and Mexico might be the most nervous.

Two processors—one near the Canadian border and the other with facilities in the U.S. Southwest—have used words like “chaos” and “havoc” when expressing concerns to Recycling Today about tariff effects on their inflows.

“Everything is dead in the water until the rules are more clearly understood. Are these tariffs going to stick? Who knows?” – Joe Perkins, CEO, Paslin

A March report from the Detroit Free Press indicates Warren, Michigan-based automotive components supplier Paslin had an “uncomfortable meeting” with a Canadian customer regarding President Donald Trump’s proposed 25 percent tariff on automobiles and auto parts.

“I’m literally stuck in limbo right now,” Paslin CEO Joe Perkins tells the Free Press. “Everything is dead in the water until the rules are more clearly understood. Are these tariffs going to stick? Who knows?”

According to recycler Ken Schutt of Detroit-based Kimmel Scrap Iron & Metal Co., the sentiment is widespread in the Motor City. He says his contacts in the automotive sector have been telling him that for the last 90-plus days not much business or work is in the pipeline beyond March. “That is scary,” Schutt says.

The confusion along the U.S.-Mexico border has been similarly portrayed.

“If the [scrap] generator doesn’t declare [imports] appropriately as the right harmonized tariff schedule code of scrap, then it may trigger a potential tariff. There’s a lot more questions than answers right now,” Patrick Merrick, president of El Paso, Texas-based W. Silver Recycling Inc., tells Recycling Today.

Obsolete scrap generation could be considered less reliant on cross-border trade compared with prompt scrap purchases. That being the case, processors will be rooting for robust construction and demolition activity and the willingness of car owners to trade in older vehicles, though some economic indicators in those sectors are mixed at best.

The Associated General Contractors of America, Arlington, Virginia, reports that construction firms continue to hire in that sector, with contractors adding a net number of jobs in 27 states in February compared with the prior month.

It’s been speculated as to how automakers and those purchasing vehicles will behave if Trump’s 25 percent tariffs on imported vehicles and components are as comprehensive as portrayed.

The 25 percent rate can be scaled back for transactions involving trade agreement partners Canada and Mexico, but overall vehicle price increases nonetheless seemingly are expected.

“With nearly half of all cars sold in the U.S. each year imported and roughly 60 percent of car parts imported before final assembly in the U.S., the implementation of these tariffs will place an enormous price burden on consumers,” a late March report by Car & Driver says.

A USA Today report on the same topic cites Bank of America research analyst John Murphy predicting that the average new vehicle cost in the U.S. could increase by $4,500, with some increases reaching $10,000.

Such price hikes are unlikely to spur new car sales in a country where the average age of used cars continues to creep upward, according to figures collected by S&P Global Mobility.

According to a May 2024 S&P analysis, the average age of cars and light trucks in the U.S. rose to a new record of 12.6 years in 2024, up by two months from 2023.

While that statistic could improve business opportunities for firms in the aftermarket and vehicle service sector, S&P says, it is less cheerful for shredder operators relying on auto hulks as part of the metals recycling chain.

As steel recyclers await clarity on scrap supply, the ability tariffs on inbound steel have to bolster activity at domestic melt shops could serve as a source of good news.

In the final full week of March, the Washington-based American Iron and Steel Institute reports domestic raw steel production increased by 0.1 percent compared with the last week in March 2024 and by 2.6 percent compared with the prior week.

A strengthened domestic market could be needed to offset questions surrounding the future of steel output in several export destinations, most notably in Turkey, where economic and political uncertainties have emerged.