America banned exporting its battery scrap, and can refine about a tenth of it

On July 30, 2026 the President issued Presidential Determination 2026-19 under the Defense Production Act, finding recoverable critical minerals scarce and essential to national defense.

On August 6, 2026 the Commerce Department’s Bureau of Industry and Security published a temporary final rule (91 FR 50701) requiring any US person selling black mass — shredded lithium-ion battery scrap containing cathode or anode material — or tungsten waste and scrap to allocate 100% of monthly sales to US persons, effective August 27, 2026 through August 27, 2027. “Sale” includes transfers to a company’s own foreign affiliates; Customs may detain shipments; BIS may grant exceptions at its discretion, aims to answer within 14 days, and will consider toll-refining abroad if the metal returns. Comments close November 4, 2026.

The Union of Concerned Scientists, citing its peer-reviewed capacity study, wrote on September 3, 2026 that North America has an overcapacity of battery shredding and an undercapacity of black mass refining: about 7,000 tonnes of refining capacity in 2026 against 65,000 tonnes of feedstock, not balanced until 2030.

The presidential determination also authorizes restrictions on end-of-life rare-earth magnets, lithium-ion batteries and swarf, and the White House fact sheet named magnets and batteries. The BRACE Act (H.R. 9615) cleared a House subcommittee on July 14, 2026 with full committee markup expected in September; a Basel Convention expert group meets September 27-29, 2026 on adding lithium, cobalt and nickel to its hazardous-waste annex.

American Battery Technology Company said on August 20, 2026 that black mass sales are the majority of its revenue, that substantially all its black mass customers are outside the United States, and that it has filed an exception request with BIS; the same day it reported record quarterly revenue of $8.2 million, $1.3 million of gross profit, $50.3 million of cash and a reinstated $57 million Department of Energy grant.

R3 Lithium opened the former Ascend Elements site in Georgia on September 4, 2026 as the first US plant to recover lithium carbonate from black mass at commercial scale. American Battery Technology closed at $2.61 on September 10, 2026 against $2.39 on August 6; Aqua Metals at $2.47 against $2.68.

Opportunity

Trade press and law firms read the rule as a problem for recyclers, and for the shredders it is: their export outlet is closed and domestic buyers cannot absorb a tenth of what they produce. Read from the other side, the same fact is a captive feedstock market.

For twelve months, 65,000 tonnes of material must find 7,000 tonnes of domestic refining or go into storage, so the price of black mass inside the United States should detach from the world price, and the refiner’s spread — between black mass and the recovered lithium, nickel and cobalt — should widen for whoever has a working plant. The Union of Concerned Scientists says as much: the companies with US refining capacity “are likely to be in high demand and to charge a premium.”

BIS built the rule with an exception valve, so the size of the glut depends on how many requests it grants, and the first decisions on requests filed in August 2026 are due within weeks of filing. Every grant leaks material out; every denial adds to domestic oversupply.

Meanwhile the Department of Energy is paying for refining capacity — $100 million grants each in August 2026 to Nth Cycle for black mass refining, to Formation Holdings for a cobalt refinery and to a Lilac Solutions vehicle for lithium carbonate, while the War Department’s Office of Strategic Capital holds a $1.4 billion conditional loan commitment to Sila Nanotechnologies — and the determination’s reach to end-of-life batteries and magnets means the feedstock side of the rule can widen before the capacity side catches up.

Hypothesis: the market has priced the rule as neutral-to-negative for the sector as a whole, but the economics split sharply between shredders (worse) and refiners (better), and the two US-listed names hold parts of both. American Battery Technology sells black mass abroad today — the losing side — while building, with federal grants, the refinery the rule was written to favour; if its exception is denied, the same company’s refining economics improve. Whether BIS grants exceptions freely is the single variable, and it is observable.

How it could play out

Exception decisions land through September and October 2026. If most are denied, US black mass prices fall below world prices, domestic refiners run full on cheap input, shredders stockpile or landfill, and lobbying intensifies into the November 4 comment deadline.

The BRACE Act markup, the EPA universal-waste rule and the Basel expert group on September 27-29 each add regulatory weight to keeping material inside the country. BIS extends the allocation to end-of-life batteries or magnets; Korean and Chinese refiners lose their US feedstock; and the August 27, 2027 expiry becomes a renewal decision with a domestic refining lobby that did not exist a year earlier.

Questions worth asking

• How many of the exception requests filed in August 2026 has BIS granted, and on what terms? A rule that exempts everyone who asks changes nothing; a rule that denies the exporters creates the glut. This decides the idea.
• Who actually owns the roughly 7,000 tonnes of US black mass refining capacity — Cirba Solutions, Redwood Materials, R3 Lithium, Glencore’s former Li-Cycle assets, American Battery Technology — and how much of it is listed?
• Where does US black mass now trade relative to the Korean import price, and has the discount appeared yet?
• Which foreign refiners lose the US feedstock — SungEel HiTech, Ecopro, and Canada’s Electra Battery Materials, which is not a US person — and how much of their supply was American?
• If the allocation is extended to end-of-life lithium-ion batteries and permanent magnets, who owns the US processing capacity for those?
• Tungsten scrap is the other half of the rule: who refines tungsten scrap domestically — Global Tungsten & Powders, Kennametal, Buffalo Tungsten — and does a captive scrap market matter with tungsten at record prices under China’s export controls?
• Does the Basel Convention move on lithium, cobalt and nickel make the export ban permanent by other means?

Where to look

• American Battery Technology Company (NASDAQ: ABAT) — sells black mass to foreign buyers today and is building a refinery with federal grants; both sides of the rule in one microcap
• Aqua Metals (NASDAQ: AQMS) — small Nevada black mass refining operation; the pure but tiny domestic-refiner expression
• Glencore (LSE: GLEN) — owner of the former Li-Cycle assets; immaterial to the group, but the only large company with US recycling capacity
• Electra Battery Materials (NASDAQ: ELBM) — Ontario refinery that cannot buy US black mass as a non-US person; the listed loser
• SungEel HiTech (KOSDAQ: 365340) and Ecopro (KOSDAQ: 086520) — Korean refiners that took US black mass exports
• Kennametal (NYSE: KMT) — recycles tungsten carbide scrap domestically; the tungsten half of the rule
• Cirba Solutions, Redwood Materials, R3 Lithium, Nth Cycle — private owners of the scarce capacity; watch for financings or listings

Thesis check

The rule is primary and in force, the capacity gap comes from published research, and the mechanism — a closed export door and a domestic refining base a tenth the size of the feedstock — is arithmetic. What would kill it: the Bureau of Industry and Security wrote itself an exception valve and the industry has already lined up to use it, so if exceptions are granted freely the domestic price never detaches and nothing happens. The other constraint is expression: American Battery Technology and Aqua Metals are microcaps trading under $3, and the largest capacity owners are private.

Sources

Federal Register (BIS temporary final rule), Aug 6 2026 · Resource Recycling, Aug 5 2026 · National Law Review (Beveridge & Diamond), Aug 11 2026 · Union of Concerned Scientists, Sep 3 2026 · American Battery Technology Company (8-K exhibit), Aug 20 2026 · Resource Recycling (R3 Lithium), Sep 4 2026 · Global Trade Alert (DOE grants), Sep 1 2026