Back to blog
Market Update

The Material Report #011

The war premium comes out

The war is over, at least on paper. The two sides signed a memorandum on June 17, the US lifted its blockade, and oil has given back the entire spike. Brent is back around $74 a barrel, roughly where it sat before the fighting started in February, down from a peak above $126. For four months this report tracked the war as the one thing pushing aluminum, copper, diesel, and freight up all at once. Now it's draining back out, and the useful question isn't whether your costs fall. It's which ones, because some of what went up was never about the war.

The reopening is real but not clean. Tankers are moving through the Strait of Hormuz again, 70 crossed on Wednesday, more than double the day before, but Iran's Revolutionary Guard struck a cargo ship on Thursday, warned that vessels can only use the routes it designates, and the international maritime agency paused its plan to evacuate ships stranded around the strait. A few tankers turned back. So the premium is coming out while the waterway is still a live situation, which means a bad week could put some of it back.

Here's the split worth planning around. Diesel, oil, and ocean shipping are falling because they were the war. Diesel is down about 80 cents a gallon from its late-May peak, to $4.83, with room to keep going if the strait holds. What isn't falling is steel, carbide, and the trucks that haul your heavy stock, because none of those climbed because of Iran. Read the difference, not the headline.

Steel: the one market that never paused

Nucor raised hot-rolled coil again on June 23, to $1,130 a ton. It has now gone up every single week since late January, through the war starting, through the worst of the strikes, through the ceasefire, without a single break. Transaction prices are running a touch under the offer, closer to $1,100, but the direction is the only thing that's mattered for five months. Service center inventories are at multi-year lows, mills are running at about 81% of capacity, and the 50% tariff keeps imported coil from competing on price. None of that traces back to the Strait of Hormuz. Steel never carried a war premium, so peace doesn't hand one back. If you buy steel regularly, the end of the war is not a reason to wait for a pullback the fundamentals aren't pointing to.

Aluminum: the part that comes back, and the part that doesn't

Aluminum is where the difference between the two kinds of cost shows up cleanest. It fell about 15% from its June 2 high to around $3,225 a tonne, its lowest since March. Read that drop carefully, because it's only half the story. The price came down because the fear came out, not because metal came back. The Gulf smelters that went dark when the war started are still dark. The big one in Abu Dhabi pushed its restart to September and may need up to a year to fully recover, and warehouse stocks are still drawing down. So aluminum gave back its war premium, the part that was pure anxiety, while it sits on a real supply hole the deal does nothing to fill. The read: don't expect aluminum to keep sliding all the way back to last year's levels. It's still short.

Carbide and freight: high for reasons the deal doesn't touch

Two more costs aren't moving, and it's worth being clear why. Carbide tooling is still expensive because China controls the tungsten behind it and has kept its export licensing tight, with shipments down roughly 40% from a year ago. That's a policy decision out of Beijing, not a shipping problem out of the Gulf, and the ceasefire doesn't change it. Kennametal is still passing through around 35% in combined price and tariff increases this quarter against last year.

Freight has a split running right through it. Diesel is falling, which should ease the fuel surcharge on your deliveries over the next few weeks. But the rate for the truck itself is going the other way. Flatbed, the trailers that carry steel and heavy stock, is at or near record rates, and flatbed capacity has dropped by roughly a third in a month. The reason is the boom in data center and power plant construction soaking up trucks, which DAT's analyst pins on "anything to do with data centers, nuclear power, diesel generation, natural gas power generation." So your delivered cost on heavy material is being pulled two ways, cheaper fuel against a pricier truck, and right now the truck is winning. If diesel keeps dropping, it's worth confirming your carriers actually pass the fuel savings back down, because that adjustment tends to move in only one direction.

Get the next Material Report in your inbox

Twice-monthly benchmarks, trend analysis, and market context written for shops and small buyers.

Pricing notes

Copper kept sliding, to about $6.10 a pound, near a seven-week low, pushed down by a strong dollar and a Fed that's leaning toward higher rates rather than cuts. Circle June 30: that's when Commerce delivers its copper report and the President decides whether to put a tariff on refined copper itself, 15% in 2027 and 30% in 2028, on top of the 50% already on copper parts. That decision comes the Monday after you read this. Brass and bronze (C260, C360) held flat.

Steel sheet is covered up top. Plate stayed firm, with another mill raising coil and plate prices in early June and heavy grades still in short supply.

Stainless surcharges should ease for July. Nickel has come off about 5~6% since the June surcharges were set near $1.03 a pound on 304 and $1.78 on 316, so if a stainless order can wait for the July number, it's worth asking your service center what the difference looks like.

Tariffs got reshuffled on June 1, and it cuts both ways depending on what you bring in. The administration lowered the rate on a batch of industrial and farm equipment to 15%, but it also made some products dutiable for the first time, including certain steel racks and furniture parts, and it dropped the US-content threshold for the lowest rate from 95% to 85%. Separately, the 10% across-the-board import tariff still expires July 24, and the replacement taking shape has no cap on how high or how long it can run, so the expiration isn't relief. If you import tooling, stock, or equipment, this is the month to have your customs broker check which bucket your parts fall into now.

The other side of the ledger

After months of costs pointing up, here's something moving the right way. Shops are buying machines again. New orders for metalworking machinery in April ran about a third higher than a year ago, and after years of falling behind the broader market, contract machine shops have caught back up. The telling part is what they're buying: order values are climbing faster than the number of machines, which means shops are adding automation and capability, not just replacing units. The same data center electricity demand showing up in your freight bill is showing up here too, in heavy orders for engine, turbine, and power equipment.

If you've been weighing a capital purchase, one more thing worth knowing. The Small Business Administration launched a loan guarantee aimed at domestic manufacturers, meant to help small shops buy equipment, modernize, or bring work back onshore. Worth a look if a machine or an expansion is on your list and financing was the holdup.

What I'm watching

The strait is still the swing factor. The war premium is mostly out of oil now, but a few more strikes like Thursday's, or a fight over Iran charging ships to pass, could put some of it back. After that: June 30 brings the copper decision, July 1 the next read on factory input costs, and the July stainless surcharges post late this month.

One number to read past. May durable goods orders fell 4.5%, which sounds alarming until you see it was aircraft orders swinging back down after April's spike. Strip out transportation and orders rose 1.3%, and the measure of business spending on equipment rose as well. So underneath the scary headline, factories kept investing, which lines up with what the machine orders are saying. The Fed held rates steady this month but signaled it's still weighing hikes, not cuts, so cheaper money isn't the help coming to offset any of this.

If your quotes are doing something these numbers don't show, let me know, especially on anything you're paying for carbide or freight right now. Real invoices from real shops sharpen the next issue more than another week of staring at price screens.

Sources

Get the next Material Report in your inbox

Twice-monthly benchmarks, trend analysis, and market context written for shops and small buyers.

What should I cover next?

Tell me what suppliers, materials, or topics you want me to look into.

If your shop sends out more than 5 RFQs a week to material suppliers, I'm building a tool over at Material Price Book that pulls all the supplier quotes back into a single comparison view. Get in touch if you'd like to take a look.

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