Is the US Using the Defense Production Act to Quietly Nationalize the Critical Minerals Recycling Industry?

If you drop a dead smartphone or a depleted electric vehicle battery into a recycling bin, you might assume its lithium, cobalt, and nickel will be melted down to build a new American battery. In reality, the United States exports roughly 33,000 metric tons of electronic scrap every month. Because domestic processing is expensive and infrastructure is lacking, the intermediate crushed material—known in the industry as "black mass"—is routinely shipped overseas, primarily to China, for final refining. For the American consumer, this means the supply chain for tomorrow's technology remains entirely dependent on foreign processing, exposing the economy to massive price shocks and geopolitical leverage.

The U.S. government has decided this free-market dynamic is a national security threat. On July 30, 2026, the White House invoked Section 101 of the Defense Production Act (DPA)—a Korean War-era statute designed to prioritize industrial resources for national defense—to fundamentally rewrite the rules of the recycling market. By granting the Commerce Department the authority to restrict the export of recoverable critical minerals, the administration is effectively forcing the domestic retention of battery scrap. We argue this is not merely a trade policy adjustment; it is a stealth nationalization of the critical minerals recycling industry, where state mandates and federal subsidies replace market forces to build a sovereign supply chain.[2]

To understand how this intervention works, one must look at the mechanics of the July 30 Presidential Determination. The directive officially classifies recoverable critical minerals and materials (CMMs) found inside end-of-life products as "industrial resources necessary to promote the national defense." This classification is the legal trigger. It empowers the Secretary of Commerce to issue regulations that prevent domestic recyclers from selling their black mass to the highest global bidder. Instead, the material must remain onshore to feed a domestic industrial base that the government is simultaneously paying to construct.

The justification for this heavy-handed state intervention lies in the recent collapse of private-sector recycling efforts. Over the past year, major battery processors like Li-Cycle and Ascend Elements have filed for bankruptcy, citing the lack of a viable path to profitability in a market flooded with cheap, state-subsidized Chinese refined materials. Private venture capital alone cannot underwrite the massive capital expenditures required to build commercial-scale refining facilities when the underlying commodity prices are highly volatile. The free market, left to its own devices, has failed to secure a domestic critical minerals loop.

In response to this market failure, the federal government is deploying capital at a scale that dwarfs private investment. Through DPA Title III funding, the Department of Defense has been directly injecting hundreds of millions of dollars into domestic recycling and processing firms. For example, the DoD recently awarded $5.1 million to REEcycle to advance a commercial facility capable of recovering rare earth oxides from electronic waste. When combined with billions in grants from the Department of Energy and production tax credits, the U.S. government is acting as the primary financier, customer, and regulator of the recycling industry.[1]

This dual approach—banning the export of raw scrap while directly funding the facilities that process it—crosses the line from industrial policy into de facto nationalization. The federal government is dictating what recyclers can sell, who they can sell it to, and providing the capital to ensure the buyers exist. While the companies remain privately owned on paper, their business models are entirely dependent on state intervention. They are operating as utilities of the national defense apparatus, insulated from global market competition by a wall of federal mandates.[2]

Critics of this view argue that "nationalization" implies government ownership, which is not happening here. Industry leaders, such as the CEO of Cirba Solutions, have lauded the DPA invocation as a necessary step to reinforce that keeping end-of-life batteries domestically is a long-term strategic priority. From this perspective, the government is merely correcting a market distortion created by foreign monopolies. By de-risking the initial capital investment and ensuring a captive supply of feedstock, the state is creating the conditions for a free market to eventually thrive onshore, not taking it over.

The ultimate impact of this policy hinges on implementation, which remains highly uncertain. The July 30 directive is a delegation of authority, not an immediate export ban. The Commerce Department must now draft the specific rules, determining exactly which materials are restricted and under what conditions waivers might be granted. If the export gates are slammed shut before domestic refining capacity is fully online, recyclers could be left drowning in black mass they cannot legally sell and cannot physically process.

Furthermore, this aggressive use of the Defense Production Act risks triggering retaliatory export controls from dominant processors like China, which already restricts the export of heavy rare earths like dysprosium and terbium. If the U.S. hoards its scrap, foreign nations may further restrict the flow of refined minerals that American manufacturers desperately need today. The transition to a closed-loop, sovereign supply chain will be a volatile decade-long process, and the American consumer will likely bear the cost of this transition through more expensive electronics and electric vehicles.[2]

The era of the globally optimized, cost-minimizing supply chain for critical minerals is over. By weaponizing the Defense Production Act to capture the recycling market, the U.S. government has signaled that it views the materials inside your old laptop not as commercial commodities, but as strategic defense assets. Whether one calls it industrial policy or stealth nationalization, the outcome is the same: the state is now the undisputed architect of the American critical minerals industry.[2]