Metals Industry Update Q1 2025

Following a tepid 2024, the U.S. metals market started 2025 on strong footing. Fueled by ongoing optimism surrounding the implementation of import tariffs, the market experienced a resurgence in activity. This positive sentiment, coupled with strategic policy enhancements and an improving economic outlook, set an encouraging tone for Q1 and months ahead.

While the expansion of trade duties, particularly those imposed on primary trade partners, Canada, Mexico, and China, may lead to trade tensions, they are intended to empower domestic players and ensure that America's metal industry remains sustainable and commercially viable.

Amid a boost in market confidence due to the pro-business approach of the new administration, U.S. manufacturing output and orders grew in January 2025, following six months of contraction. However, the growth was partly spurred by advance purchases driven by the anticipation of price hikes and supply chain disruptions following the reinstatement of tariffs. Although the PMI remained in expansion throughout Q1, the enthusiasm softened in March due to looming uncertainties regarding the inflationary impact of tariffs.

Despite a pause in funding disbursements related to the IRA and parts of the Infrastructure Bill, the renewable energy sector continues to thrive due to strong investment and industry support. Metal-intensive wind, solar, and battery storage construction projects play a crucial role in meeting rapidly increasing domestic energy demand, thereby driving metals market growth.

Finally, while the economy appears healthy and the Fed remains positive on managing foreseeable risks with its current policy stance, policymakers have lowered their GDP growth estimate for 2025. However, two quarter-point interest rate cuts (and potential additional tariff-triggered cuts) remain anticipated in 2025, which will encourage investment and consumption.

Against the backdrop of high borrowing costs and economic uncertainty, the metals M&A remains subdued. However, as conditions improve, strategic dealmaking is expected, with an investment focus on companies that effectively navigate through macroeconomic risks and are able to secure a stable or stronger financial footing.