Key Points
- President Donald Trump’s tariffs on aluminum imports are spurring growth in recycling as consumers try to avoid additional costs from duties.
- Recycling the metal consumes just 5% of the energy it takes to produce the same amount of primary aluminum through a smelter, making it more environmentally friendly.
- The strong dynamic could change trade flows, making the U.S. — which largely exports its scrap metal — an importer.
U.S. President Donald Trump’s 50% tariffs on aluminum imports are aimed at reviving its factories, but a greener and more profitable boom may be emerging from the nation’s scrap yards. The protectionist trade policy, often at odds with environmental goals, is in fact building the economic case for recycling the millions of tonnes of scrap metal exported every year. “If the U.S. administration wants to improve self-reliance on aluminum, the quickest way to do it will be to keep more of the scrap in the U.S. and support recycling capacity,” said Trond Olaf Christophersen, chief financial officer of Hydro , one of the largest aluminum smelters in the world. Recycling the metal also consumes only 5% of the energy it takes to produce the same amount of primary aluminum through a smelter, making it more environmentally friendly, according to the International Aluminium Institute, a trade association. Impact of tariffs on aluminum consumers The U.S. faces a large aluminum deficit and relies on importing on average 5.5 million tonnes per year to meet demand, according to the U.S. Department of Commerce. But Trump’s new tariffs have driven up the cost of imports, causing the U.S. Midwest premium — a key benchmark for the domestic price — to surge dramatically from 2024 levels. That has provided a windfall for some domestic producers but has pushed up costs through the supply chain, with downstream users like PepsiCo and Campbell Soup facing price hikes on everything from beverage cans to tinplate steel. The price shock is forcing downstream manufacturers to seek alternatives, leading to potential “demand destruction.” That pressure, Hydro’s Christophersen suggests, could strengthen the case for cost-effective recycled aluminum. The (un)obvious alternative While the U.S. imposes a 50% tariff on primary aluminum, scrap metal is not subject to the same duty. The disparity has created a significant economic incentive for domestic recycling plants, allowing them to sell remade metal at the high prices commanded by tariff-protected primary aluminum. The dynamic is so strong it could reverse global trade flows. The United States, which until recently exported about 2 million tonnes of scrap annually , has begun to export much less, partly because of the lack of supply but also because of diversion to feed local recycling capacity. “There is a clear incentive to export scrap from Europe to the U.S.,” said Hydro’s Christophersen, though he noted that volatility in the transatlantic trade environment is limiting those flows. “We’re not seeing a lot of scrap exports [from Europe at the moment] because the trade environment is so volatile and are fully dependent on where Europe ends up when it comes to tariff [with] the U.S.,” he added. “That will decide whether this continues to be incentive or not.” According to Hydro, recycling all the scrap in the U.S. would be the equivalent of building four new primary smelters and could satisfy “roughly half the import need that the U.S. currently has.” A policy shift, such as an export ban or tariff on scrap, would keep this raw material within the U.S. and accelerate the recycling trend. A compelling business case Building a new recycling facility requires only about 10% of the capital expenditure and can be completed in one to two years, less than the five-to-six-year timeline for a traditional smelter. Hydro completed the construction of its third aluminum recycling plant in November 2023 at Cassopolis, Michigan, taking its total production capacity to more than 300,000 tonnes annually. The low energy requirements relative to primary aluminum production is also particularly attractive as U.S. industries increasingly compete for electricity, thanks to the surging energy demands of AI data centers. Major manufacturers such as BMW and Hyundai have also shown “a lot of interest” in sourcing low-carbon aluminum, a market that an expanded U.S. recycling industry would be well positioned to serve, according to Bank of America analysts Michael Widmer and Francisco Blanch. While the tariffs are causing short-term pain and threaten billions of dollars in investments, they may be inadvertently charting a more sustainable and independent course for the industry. “Given that the U.S. administration has a policy to improve self-reliance on materials,” Christophersen concluded, “what we are saying is that this is the quickest way to do it.”