The Material Report #008

Where the work is going, and what it takes to get in

The U.S. machine tool market is up 31.5% year over year through March, but most contract shops aren't seeing that growth on their order books. AMT, the trade group that tracks U.S. machine tool orders, put it plainly in their latest release: contract job shops "continue to underperform the broader market."

Almost all of the incremental demand is concentrating in three places: data center electrification, the submarine industrial base, and defense programs that need to scale fast. Eaton said on its May 5 call that its data center order backlog has reached 228 gigawatts, the equivalent of 12 years of building at current rates. Howmet's gas turbine revenue for power generation is up 39%. GE Vernova's gas power backlog jumped from 83 to 100 gigawatts in a single quarter.

The defense side is moving just as fast. The Navy awarded General Dynamics Electric Boat $2.3 billion on May 11 for early manufacturing on Virginia-class Block VI submarines, with work spreading across more than 16 states and hundreds of Tier 2 and Tier 3 suppliers. Two days later, Anduril closed a $5 billion funding round to scale production at its 5 million square foot Arsenal-1 plant in Ohio. The same day, Castelion signed a framework with the Department of War to build a minimum of 500 hypersonic missiles per year. And on May 14, China committed to buying 200 Boeing jets as part of the Trump-Xi summit in Beijing, the first major Chinese order in nearly a decade. That works back through Tier 2 and Tier 3 aerospace suppliers over the next 3~5 years.

These order books aren't out of reach because the work is exotic. They're out of reach because they require certifications most general job shops don't have. Roughly what each tier costs a 25-person shop:

• AS9100D (aerospace quality): $8K~30K to certify plus $3K~15K per year in surveillance audits, about 12 months end to end.
• ITAR registration (defense export): $3,000 per year minimum, plus the internal compliance work.
• CMMC Level 2 (defense cybersecurity): $70K~250K in the first year for a shop that needs network segmentation, documented policies, and a third-party assessment. About 12~18 months from a cold start.
• Nadcap (aerospace special processes like heat treat, NDT, welding): $4K~15K per process.

The hard date worth marking is November 10, 2026. That's when CMMC goes mandatory for any defense contract that touches controlled information, with no small business carve-out. As of February, roughly 1,100 contractors had completed Level 2 certification against an estimated 76,600 that need it.

If any of this is on your radar, the first call this week should be to your state NIST MEP center. Every state has one. They subsidize part of the cybersecurity work and AS9100D prep for small manufacturers, and they don't sell you anything on the first call.

The cyber problem most shops underestimate

Two events frame this issue. On May 7, West Pharmaceutical Services disclosed a ransomware attack that took global operations offline. On May 12, Foxconn confirmed a breach where attackers claimed to have stolen 8 terabytes of files. Both companies are large and well-resourced, and yet manufacturing as a whole is the most-attacked sector in the world right now.

Arctic Wolf's 2026 threat report found manufacturers absorbed nearly 70% more ransomware attacks than the next-worst sector. Dragos, which specializes in industrial controls, is tracking 119 ransomware groups actively hunting manufacturers, up 49% year over year. The median ransom demand against a manufacturer is $490,000.

Attackers usually don't come in through the old Windows XP machine running a Fanuc control. They come in through the office VPN or remote desktop login, almost always with a stolen password. From there they move sideways onto a flat shop network where any unpatched control becomes collateral damage.

Three things any shop owner can do this month. Turn on two-factor authentication on every remote access tool you have. Ask your IT person whether the office network and the shop floor network are actually separated from each other. And make that MEP call. The federal CISA agency also offers free vulnerability scanning if you ask. None of these cost five figures.

Carbide: same playbook, different cadence

The big carbide tooling suppliers are running similar playbooks but at different cadences. Kennametal raised list prices May 1 and told investors on its May 6 call to expect roughly 35% combined price and tariff surcharge in the June quarter, with more pricing actions to follow as tungsten costs work through inventory. CEO Sanjay Chowbey said vertical integration is letting Kennametal pick up business "competitors are turning away."

Sandvik is raising prices too. CEO Stefan Widing told investors on the April 22 call that "key competitors are following our price increases." But the way Sandvik's supply chain is structured, the cutting tools they're shipping now use powder bought roughly nine months ago. Powder pricing lags raw tungsten by a month on the way out and three months on the way in, then the cutting tools sit on another six-month lag behind that. So Sandvik's invoice prices have been climbing, but not at the same speed as Kennametal's. If you buy enough volume from either rep to have a real conversation, this quarter is when the gap between list and what they'll actually quote is widest.

Regardless of brand, your scrap carbide bucket is worth roughly three times what it was 12 months ago. Solid carbide is going for $10~14 per pound at independent dealers, with top-tier OEM buyback (Kennametal, Sandvik) still posting as high as $31. Dealer floor cooled, OEM ceiling held. Before truing your tooling inventory for the quarter, get an independent quote and compare it to whatever credit your OEM rep is offering.

Pricing notes

Steel sheet is still grinding. Nucor took hot-rolled coil to $1,080 per ton on May 11, a multi-year high and 23 straight weekly hikes.

Steel plate cracked. Nucor Plate held July prices unchanged on May 8, which an East Coast service center called "a surprise." SSAB raised plate $40 per ton on May 11. June 5 is the order deadline for July plate.

Aluminum broke higher. LME aluminum hit $3,676 per tonne on May 12, the highest since March 2022. Midwest Premium is around 90 cents per pound. Distributor sheet refreshes on 6061 and 7075 will start showing up in 2~4 weeks.

Copper set an all-time high of $6.58 per pound on May 12 before settling near $6.53. Brass and bronze scrap moved with it. C260 and C360 distributor stock will reprice fast.

Tariffs: a federal court struck down the 10% global baseline tariff on May 7, but a higher court paused that ruling within days pending appeal. You still pay 10% at entry today. The Trump-Xi summit this week produced warm language but no changes to the underlying tariff schedule. The statutory expiration is still July 24, and the administration has signaled a new Section 301 regime by then, probably skewed harder against China. If you import tooling or stock from China, you have about 70 days to pull forward inventory at the current rate.