The upward momentum that drove recycled steel prices higher in the first quarter of 2025 is expected to slow in April. This pause is linked to challenges faced by scrap processing firms, including supply shortages and higher margins paired with lower volumes. Despite fluctuations being common in the scrap industry, the recent tariff policies and trade issues have added uncertainty, particularly for recyclers in the U.S.-Canada and U.S.-Mexico trade zones.
Challenges in the Scrap Industry and Tariff Impact
Scrap processors are carefully tracking industrial buying volumes and supply trends. Policies from the Trump administration continue to impact material flows. Recyclers are especially concerned about how tariffs will affect their operations. Those near the U.S.-Canada border and in the Southwest U.S. feel the most uncertainty. Two scrap processors spoke with Recycling Today, using words like “chaos” and “havoc” to describe their experiences with cross-border trade.
A recent report highlighted challenges faced by Michigan-based automotive parts supplier, Paslin, due to a proposed 25% tariff on vehicles and auto parts. CEO Joe Perkins shared his frustration, stating, “Everything is dead in the water until the rules are more clearly understood.” This uncertainty is widespread in the Motor City area. Recycler Ken Schutt noted that new business beyond March 2025 is limited, which creates concern.
The confusion also extends to the U.S.-Mexico border. Patrick Merrick of W. Silver Recycling Inc. raised concerns about scrap materials being incorrectly classified under the Harmonized Tariff Schedule (HTS). This misclassification could lead to unintended tariffs. Such issues are especially concerning for the processing of prompt scrap, which is heavily reliant on cross-border trade.
Recycling Outlook: Opportunities in Construction and Demolition
Despite these challenges, obsolete scrap generation remains less dependent on cross-border trade. This offers hope for U.S. recyclers. Processors are hoping for a boost in construction and demolition activity and increased trade-ins of older vehicles. The Associated General Contractors of America (AGC) reported job growth in the construction sector. In February 2025, contractors added jobs in 27 U.S. states.
However, the outlook for the automotive sector remains uncertain. If the proposed 25% tariffs on imported vehicles and parts are implemented, experts predict vehicle prices will rise. Bank of America analyst John Murphy suggested prices could increase by $4,500, with some rising up to $10,000. Such price hikes could discourage new car sales, especially as the average age of U.S. vehicles rises.
According to S&P Global Mobility, the average age of cars and light trucks in the U.S. reached 12.6 years in 2024. While this provides opportunities for aftermarket services, it poses challenges for auto shredding plant operators who rely on older vehicles for scrap.
Positive Outlook for Domestic Steel Production
While scrap recyclers navigate uncertainty, domestic steel production shows promise. The American Iron and Steel Institute (AISI) reported a 0.1% increase in domestic raw steel production in the final week of March 2025, compared to the same period in 2024. This increase was 2.6% higher than the prior week. This boost in domestic steel production could help offset concerns related to export market fluctuations, particularly in Turkey, where economic and political instability are creating uncertainty.
Conclusion
The ferrous market faces several challenges, including scrap supply issues, tariff policies, and international trade concerns. However, the rise in domestic steel production provides a hopeful outlook for recycled steel prices. As recyclers continue to adapt to shifting policies, a balanced approach between domestic production and global market trends will be crucial for navigating the coming months.
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