Ferrous price hikes could be poised to pause

Upward momentum that characterized the value of recycled steel in the first quarter of this year appears destined to come to a halt in April. The bull market was not entirely enjoyable for scrap processing firms, since a lack of supply throughout the winter months coupled potentially higher margins with lower overall volumes.

On the scrap generation front, recyclers will be keeping an eye on their scales and industrial buying volumes to determine how a flurry of policies emanating from the office of President Donald J. Trump is affecting material flows as winter turns to spring.

Perhaps most nervous of all are United States processors and traders who conduct business with sellers or buyers in Canada and Mexico.

Two different scrap processors—one close to the Canadian border and the other with facilities in the U.S. Southwest—have used words including “chaos” and “havoc” when expressing concerns to Recycling Today about how tariffs will affect their scrap inflows.

A late March report from the Detroit Free Press describes Michigan-based automotive components supplier Paslin as having experienced an uncomfortable meeting with a Canadian customer regarding the Trump administration’s proposed 25 percent tariff on autos and auto parts.

The article quotes Paslin CEO Joe Perkins as remarking, “I’m literally stuck in limbo right now. 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 region. He says his contacts in the automotive sector have been telling him “for the last 90-plus days that there is not much business or work in the pipeline beyond March 2025. That is scary.”

The confusion along the U.S.-Mexico border has been similarly portrayed to Recycling Today by Patrick Merrick, president of El Paso, Texas-based W. Silver Recycling Inc., who comments, “If the [scrap] generator doesn’t declare them appropriately as the right Harmonized Tariff Schedule (HTS) code of scrap, then it may trigger a potential tariff. There’s a lot more questions than answers right now.”

The generation of obsolete scrap 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.

While some of the economic indicators in those sectors are sending mixed signals at best, the Virginia-based Associated General Contractors of America (AGC) says construction firms continue to hire in that sector, with contractors adding a net number of jobs in 27 U.S. states in February compared with the prior month.

Predicting how the auto producers that sell cars to the American public and the buyers of those cars will behave if the Trump administration’s 25 percent tariffs on imported vehicles and components are as comprehensive as portrayed has produced considerable speculation.

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

A late March article by Car & Driver states in part, “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 USA Today article on the same topic cites Bank of America research analyst John Murphy as predicting the average new vehicle cost in the U.S. could rise by $4,500, with some increases reaching $10,000.

Such increases 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 business information services firm S&P Global Mobility.

According to an analysis by that firm released last May, “The average age of cars and light trucks in the U.S. has risen again to a new record of 12.6 years in 2024, up by two months over 2023.”

While that statistic could “improve business opportunities for companies in the aftermarket and vehicle service sector,” according to S&P Global Mobility, it is less cheerful for auto shredding plant operators who rely on auto hulks as an important part of the metals recycling chain.

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

In the final full week of March, the Washington-based American Iron and Steel Institute (AISI) says domestic raw steel production rose by 0.1 percent compared with the last week in March 2024 and increased 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 the world-leading market of Turkey, where economic and political uncertainty has emerged.