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Market Update

The Material Report #003

Steel Broke $1,000. Stainless Is Up 22%. And Energy Costs Just Got Worse.

On February 28, the US and Israel struck Iran. Iran retaliated by effectively shutting the Strait of Hormuz, which carries roughly 20% of the world's oil and LNG. Brent crude has gone from $73 to above $90 in a week, the biggest weekly jump since 2022. Qatar's energy minister warned $150 is possible if tankers can't get through. Iraq is already shutting down oil fields because they can't export.

If you're wondering what a war in the Middle East has to do with your material costs, energy is a huge part of the cost of aluminum smelting, electric arc furnace steelmaking, and shipping material from mills to your door.

This is on top of a market that was already moving against you:

  • Steel just broke $1,000.
  • Stainless surcharges are up 22% since January.
  • Your service center is passing through the costs they absorbed in Q4.

Your Service Center Stopped Absorbing the Increases

Ryerson reported Q4 2025 earnings and their gross margins dropped 1.9% to 15.3%. Their CFO said material costs rose faster than they could price into the market.

That means your service center was absorbing the mill price increases for the last few months because demand was too soft to pass them through. Now demand is up 13~15% in Q1, and their CEO called it the best start to a year since 2022. The cost increases they ate in Q4 are landing on your invoices now.

Their merger with Olympic Steel also closed on February 13. Ryerson now has 159 combined facilities, making them the #2 service center in North America. Worthington Steel announced a $2.4 billion acquisition of Kloeckner on top of that. The industry is consolidating. Fewer suppliers means less leverage for small buyers.

Prices Since Last Issue

Steel broke $1,000. Nucor's HRC spot price hit $1,005/ton on March 2. They've posted consecutive weekly increases since early 2026: $965, $970, $975, $990, $1,005. California Steel Industries is at $1,055 reflecting the West Coast premium. With imports down, scrap costs up, and mill maintenance outages tightening supply, the energy spike makes it worse.

Stainless quietly moved more than anything else. March alloy surcharges on 304 are up 18% year-to-date. On 316, it's 22%. A 316 job you quoted in January is losing money now. The driver is nickel. Indonesia slashed mining permits from 379 million wet tons to 260 million in 2026. LME nickel is in the $17,000~$18,200/tonne range and could push higher. If you're machining 304 or 316, reprice open quotes immediately.

Aluminum surged 5% in two weeks. LME jumped from $3,100 to $3,256/tonne, approaching the January high of $3,270. China's production cap is expected to bind by Q2. On top of LME, you're paying a 50% Section 232 tariff plus the Midwest premium ($200~300/ton). Aluminum smelting is extremely energy-intensive, so the Hormuz situation adds direct upward pressure here.

Copper is flat around $5.90/lb but many factors point toward higher prices ahead. The Department of Commerce is expected to deliver its copper tariff recommendation to the President by June 30. If approved, the tariff would be 15% starting January 2027 and 30% starting January 2028. If you're quoting copper work that extends into next year, build in some room for it.

Brass and bronze are driven by copper and zinc prices, both elevated. C360 brass rod is in the $6.89~$7.25/lb range depending on size, based on our data.

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ISM: Manufacturing Continues to Grow, but Input Costs Hit a 4-Year High

February ISM Manufacturing PMI came in at 52.4 (above 50 means expansion), down slightly from January's 52.6. That's two straight months of expansion for the first time since early 2024. Primary metals, fabricated metals, and machinery all reported growth, and backlogs grew significantly, meaning shops are booking more work than they can ship immediately.

The catch: input costs surged to their highest level since June 2022. Every commodity in the ISM survey rose in price in February except freight, and that was before the Hormuz closure. If your contracts allow it, this is when escalation clauses matter most. If they don't, call your customer now. With costs moving this fast on multiple fronts, most buyers would rather renegotiate than have you eat a loss and cut corners.

The Supreme Court Struck Down IEEPA Tariffs (the "Reciprocal" Tariffs). Here's What Actually Changed.

We said in Issue #002 we'd cover the full fallout. Here it is.

The Supreme Court ruled 6-3 that IEEPA doesn't authorize the President to impose tariffs. All IEEPA-based tariffs are gone. Within hours, the administration replaced them with a 10% global import surcharge under Section 122 of the Trade Act of 1974, effective February 24 for 150 days. Trump has said it'll go to 15%.

For shops buying raw metal, nothing changed. Section 232 tariffs on steel, aluminum, and copper are unaffected. They rest on completely different legal authority and remain at 50%. The Section 122 surcharge also exempts products already covered by Section 232.

Side note: if you've imported tooling or components since February 2025, you may have paid IEEPA tariffs that are now refundable. Check with whoever handled your customs paperwork.

What to Do Right Now

Reprice any open stainless quotes. The surcharge increase since January is large enough to flip a profitable job into a loss. If you're locked into fixed pricing, have the conversation now rather than later.

Lock in material on confirmed orders. Nucor's weekly increases, the Ryerson pass-through, and the energy spike are all pushing prices up at once. If you have a signed PO, buy the material now rather than waiting for prices to come down.

Shorten quote windows further. With input costs at their highest since mid-2022 and prices moving on multiple fronts, even 15-day quotes carry more risk than usual.

Watch the Strait of Hormuz. Oil is up 25%+ this week and the strait is still effectively closed. Iran says they're not seeking a ceasefire. If it stays shut, every price in this newsletter goes higher.

Also worth knowing: tungsten carbide powder is up roughly 450% since early 2024 after China restricted exports. If your tooling costs feel like they've doubled, they probably have. We'll cover this in detail in Issue #004.

Eric Na writes The Material Report, a bi-weekly newsletter on metal pricing trends for machinists and shop owners.

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