The Material Report #005

The Margin Squeeze Is Here. And the Tariff Rules Just Changed.

March manufacturing PMI came in at 52.7 on Tuesday. Three straight months of expansion, highest reading since August 2022. Sounds good until you look at what's underneath.

Input costs spiked to 78.3, up almost 8 points in a single month and the highest reading since June 2022. Every commodity tracked in the PMI survey went up. Zero went down. At the same time, new orders weakened from 55.8 to 53.5, and the ratio of positive-to-negative sentiment among survey respondents dropped from 2:1 to 1:1. Export orders slipped back into contraction. Employment has been contracting for 30 straight months.

That combination matters. For the last four issues, the advice has basically been "buy ahead because prices are going up." That's still true on some materials. But when costs are accelerating and demand is softening at the same time, buying ahead carries a different kind of risk. If your backlog slows down while you're sitting on $50K of aluminum you bought at peak pricing, that cash is locked up in material you might not move for months.

The chair of the survey called it a "bad cocktail" and noted that 64% of respondent comments were negative, split roughly between tariff concerns and the war in the Middle East.

What this means in practice: be selective about what you buy ahead on. If you have firm orders with material needs in the next 60 days, lock those in. But speculative inventory purchases are riskier now than they were two months ago.

The Tariff Rules Just Changed

On April 2, the president signed a restructuring of Section 232 tariffs on steel, aluminum, and copper. The 50% rate on raw metals (coil, sheet, bar, plate) stays the same. What changed is how tariffs apply to products made from those metals.

The new system is tiered. Products that are mostly metal (like pipe and tube) drop to 25%, but the tariff now applies to the full value of the imported product, not just the metal content. That's a meaningful change for anything with fabrication value added overseas. Metal-heavy industrial and electrical equipment pays 15% through 2027. Products made abroad using 100% American-origin metal pay 10%. And products where metal makes up 15% or less of total weight are now exempt entirely.

For most CNC shops buying domestic material from service centers, this doesn't change your day-to-day costs. But if you import tooling, machine components, or any products with significant metal content, the way your tariff is calculated just changed. Worth a conversation with your supplier or customs broker to understand where you land in the new tiers.

Prices Since Last Issue

Aluminum: The situation got worse. Iranian missiles physically hit both EGA in Abu Dhabi and Alba in Bahrain on March 28. This isn't a voluntary shutdown anymore. Molten aluminum solidified in the smelter lines, and restart timelines are now measured in months to years. The US Midwest Premium broke $1.00/lb for the first time ever. All-in delivered cost for primary aluminum is above $2.50/lb. Distributor-level pricing on 6061-T6 is running $3.50~$6.00+/lb depending on form and quantity.

Steel: Nucor has been raising HRC prices every week since late 2025, and the pace just doubled from $5/ton to $10/ton per week. HRC at $1,035/ton as of March 30, with spot quotes as high as $1,074. Mills are refusing to negotiate on spot prices. One service center described it as "limited availability, not strong demand" driving the increases. Plate at $1,130~$1,180/ton with 6~9 week lead times.

Stainless: April 304 surcharge at $0.9317/lb, down a penny from March. 316 ticked up to $1.6139/lb. The bigger story is North American Stainless raising the fuel surcharge from 32% to 48%, a 50% relative increase that reflects the energy cost explosion.

Copper: Pulled back to about $5.58/lb from the $5.83~$5.99 range last issue. The Commerce Department report on whether to impose 15% tariffs on refined copper starting January 2027 is still due June 30.

Brass and bronze: Tracked copper's pullback. Relatively stable.

Paragon Machine Works Closed After 43 Years

This one's worth knowing about even if you've never heard of them. Paragon Machine Works, a CNC shop in California, shut down on March 27 after 43 years in business. They supplied an estimated 90%+ of custom bicycle framebuilders in the US with precision machined components like dropouts, headtube inserts, and bottom bracket shells. The company said the business was "no longer viable due to a variety of market and industry factors beyond our control."

The closure sent the framebuilding community scrambling. There's no obvious replacement for what they made. It's a reminder that being dominant in a niche market is great until that market shifts underneath you. Customer diversification isn't just about protecting against losing one account. It's about making sure your entire end market doesn't evaporate.

What to Watch

More tariffs are possible, with an April 15 deadline to watch. The administration is investigating whether to impose permanent tariffs on metals and manufactured goods from 16 countries. These would have no rate cap and would stack on top of the 50% tariffs already in place. The public comment window closes April 15, with decisions expected within 12 months.

Carbide tooling increases hit May 1. Sandvik Coromant and Kennametal both have new price lists effective May 1. OSG's went into effect April 1 with a 4.9% surcharge. Tungsten supply isn't improving before 2027 at the earliest, so there's no reason to expect these increases to reverse.

Hormuz is still closed. Oil hit $141/barrel on the physical market on April 2. Diesel is $5.07~$5.43 nationally, $7.22 in California. No ceasefire negotiations. Plan for elevated energy and delivery costs through at least the summer.

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

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