Metals and Diesel Prices Squeeze Contractors as Construction Input Costs Edge Up in 2025

This cost escalation now faces another geopolitical wrinkle. In late December, Canada announced it will apply a new 25% tariff on a sweeping list of steel derivative products exported to the United States, a move that industry groups warn could only add to price instability for American sheet metal and HVAC contractors. The policy, designed to counterbalance increased U.S. tariffs and global trade shifts, is set to take effect December 26, 2025, and industry voices are already bracing for the impact on supply chains that rely on Canadian steel.

According to government statistics, the producer price index for materials and services used in nonresidential construction rose by 0.2 percent in September, and has jumped 3.2 percent over the past year. Metals are at the center of the squeeze: aluminum mill shapes soared by a staggering 26 percent year-over-year, while steel mill products rose 12.4 percent despite a minor month-to-month dip. The index for precast concrete products also increased, up 5.5 percent year-over-year. Diesel fuel – a linchpin for hauling HVAC and sheet metal products – climbed 8.2 percent in the last year.

For industry leaders, price uncertainty is anything but theoretical. “Tariffs are definitely challenging, is the best way to put it,” said Mike Luongo, president of Total Home Supply. “When talk of tariffs started, we bulked up – more than doubling our inventory before tariffs took effect. That worked well for us over the summer, but some manufacturers just don’t know how to price anything at this point because it keeps changing.” Luongo added, “It’s not the tariffs that are the problem so much as the fact that it’s not stable. If you’re going to have a tariff, stick with it. But it changes so much that manufacturers can’t figure out what to do.”

That instability has real consequences for operations. Luongo said his company now manages about 10,000 square feet of warehouse space, a footprint expanded specifically to weather price surges and keep products moving. Instead of expanding into new lines, he explained, “we were compelled to bulk up on things we were already carrying,” a strategy mirrored across the sector as contractors adjust to a supply chain with few guarantees.

These kinds of adaptive strategies are echoed at larger distributors, too. “Like many companies in our industry, tariffs and other global trade dynamics can impact product costs and supply chains,” said Nando Cunha, COO of SupplyHouse.com. “We work closely with our manufacturing partners to manage these changes while keeping our pricing as competitive as possible for our customers.”

Contractors face an uneasy balancing act, with input costs creeping upward even as bid price growth cools in a softer market. “These month-to-month swings make it harder for firms to plan and protect already-thin margins,” noted Macrina Wilkins, senior research analyst at AGC. The report warns that unpredictable costs, compounded by uncertainty over tariffs and global trade policy, leave HVAC and sheet metal contractors struggling to lock in pricing and plan projects confidently.

Jeffrey D. Shoaf, AGC’s chief executive, called for policy clarity: “Contractors can manage modest cost increases, but they need a predictable environment to keep projects moving. Greater clarity on tariff policy would help stabilize materials markets and give firms more confidence to plan for the work ahead.”

For the HVAC and sheet metal sectors – where project margins are already tight and materials make up a significant share of job costs – the latest figures serve as a reminder: volatility is back, and budgeting for 2026 means watching input prices closer than ever.

View the latest producer price index data here