Pre-buying steel coil right now is either the smartest move you make this year or the one that eats your line of credit alive. With Section 232 tariffs sitting at 50 percent and the producer price index for steel mill products up 20.7 percent year over year, the math has shifted hard. I’ve watched contractors get rich on coil they bought six months ago. I’ve also watched contractors pay warehouse rent on inventory that didn’t move while their working capital sat frozen in a rack.
TL;DR: Pre-buying steel coil to beat tariff escalation is a real strategy and a real way to lose money. The math changes based on backlog visibility, storage cost, and access to working capital. Contractors who pre-buy without sold work behind it are gambling with their line of credit. The ones who match coil to contract win. Know which one you’re doing.
The tariff math changed the moment Section 232 hit 50 percent
Eighteen months ago, pre-buying coil was a margin play. You bought ahead, you saved three or four points, you held inventory for a quarter, you booked the spread. The downside was warehouse rent and a slow opportunity cost on your cash. Manageable.
Now the math is different. Section 232 tariffs on steel and aluminum doubled to 50 percent in June 2025 under presidential proclamation, and the Bureau of Industry and Security expanded the tariff scope to 407 derivative product categories in August 2025. The producer price index for steel mill products climbed 20.7 percent year over year through mid-2025, per BLS data. Coil prices that were quoted at 78 cents a pound in early 2024 ran past 95 cents by Q2 2025 on a lot of common gauges.
That kind of move turns a margin play into a survival play for some shops and a wealth event for others. The difference between those two groups isn’t market timing. It’s discipline.
The only good reason to pre-buy is sold work
I’ll say this plain. If you don’t have signed contracts behind the coil you’re buying, you’re speculating. Call it what it is.
Speculation can work. Plenty of contractors made money on it in 2024 and 2025. But speculation isn’t a roofing business. It’s a commodities trade you’re running on the side, financed by your roofing credit line, with no risk controls and no exit plan if the trade goes against you.
The contractors I’ve seen win the pre-buy game over the last 18 months did one thing the speculators didn’t. They matched coil to contract. They had a backlog of signed work with material allowances priced at today’s coil cost, and they pre-bought against that backlog. The coil was already sold. The customer already accepted the price. The pre-buy was just a delivery and storage decision.
If a tariff hike comes mid-job and you’ve already locked your coil cost, you keep the margin you priced. If the customer cancels, you have a buyer for that coil because it was specced for a real building. The downside is a slow week of phone calls. The upside is your bid wins because you priced firm while everyone else added a 12 percent contingency.
What backlog visibility actually means
Backlog visibility isn’t a number on a spreadsheet. It’s a question you should be able to answer cold. How much signed work do I have, in what months, requiring what gauge and what coating, and on what payment terms.
If you can’t answer that without pulling three reports, you don’t have backlog visibility. You have a wish list.
Real visibility looks like this. You have 90 days of signed work in your hand. You know the metal building runs scheduled for July, August, and September. You know which contracts have material escalation clauses and which ones locked at bid. You know which projects are funded and which are still waiting on the owner’s bank. From that, you can tell me exactly how many tons of 24-gauge Galvalume in standard widths you’ll pull in the next quarter.
That’s the number you pre-buy against. Not the number you hope to sell. The number that’s sold, scheduled, and funded.
Carrying cost is real, and most contractors lowball it
Here’s where contractors fool themselves. They run the savings math on the coil price and forget the carry.
Warehouse rent on conditioned racked coil in the Midwest is running 35 to 60 cents per square foot per month, depending on market. A typical coil weighing 18,000 pounds on a rack takes about 25 square feet of floor with aisle access. That’s 9 to 15 dollars per coil per month just for the floor. Add insurance, racking depreciation, forklift time, inventory shrink, and the cost of capital on the money sitting in that steel.
If your line of credit is at 9.5 percent right now, and your coil cost is 42,000 dollars, you’re paying 333 dollars a month in interest carry alone. Hold that coil for four months and you’ve burned 1,332 dollars in interest on a single roll. That’s before warehouse rent, insurance, or the risk of damage.
The pre-buy math has to beat all of that, plus a margin of safety. Otherwise the savings on the coil price evaporate the longer it sits.
What happens if tariffs come down mid-year
This is the question every speculator should be losing sleep over.
The current tariff structure is a presidential proclamation, not legislation. It can be modified, expanded, or reduced by the same authority that imposed it. There are active legal challenges to the Section 232 framework. There are trading partners negotiating exemptions. The political calculus changes every quarter.
If tariffs come down 20 percentage points mid-year, the coil you bought at 95 cents is suddenly worth 78 cents on the open market. Your speculator competitor who didn’t pre-buy is now bidding new work with a lower material cost than you’re sitting on. Your customers with escalation clauses will renegotiate. Your customers without them will start asking why your price is higher than the other quote.
This is the asymmetric risk speculators ignore. Tariff goes up, you make money. Tariff comes down, you eat the spread. There’s no upside cap and a real downside floor.
The way you protect against this is by matching coil to contract. If the coil is already sold at the higher price, a tariff drop doesn’t hurt you. The customer paid the locked rate. You delivered the product. The trade is closed.
Passing pre-buy savings to customers without losing margin
One of the smartest plays I’ve seen this cycle is contractors using pre-buy savings as a closing tool, not a profit grab.
If you bought coil at 82 cents and the spot market is at 95, you have 13 cents per pound of unrealized spread. The amateur move is to pocket all of it. The veteran move is to share some of it with the customer to win the bid.
Say a competitor is bidding at 95-cent coil pricing with a 12 percent margin. You can bid at 89-cent coil pricing with a 14 percent margin and still come in lower than them. You win the contract, you book a better margin than your competitor would have on the same job, and the customer feels like they got a deal. Everybody wins, except the contractor who refused to pre-buy and now has no negotiating room.
The principle is simple. Pre-buy savings are an asset. Use them to win work, not to inflate margin on work you’d have won anyway.
How to know which game you’re playing
Run this checklist before you pick up the phone to order coil.
- Do I have a signed contract behind every roll I’m about to buy
- Is the contract priced with today’s coil cost or today’s coil cost plus a buffer
- What is the customer’s payment history, and is the project funded
- What is my fully loaded monthly carry per coil, including interest, rent, and insurance
- How long until I draw the coil down, in weeks
- What is my exit if the project pushes 90 days or cancels
- Does my line of credit have room for this purchase plus a 25 percent buffer for other working capital needs
If you can answer all seven cleanly, you’re running a coil inventory strategy. If you can’t, you’re speculating with your business as collateral.
The practical takeaway
Match coil to contract or don’t buy. That’s the whole rule.
Pre-buying against signed backlog with locked-rate contracts is a real margin tool that smart contractors are using to win work and protect cash flow. Pre-buying without sold work behind it is a commodities bet financed by your operating line, and you aren’t in the commodities business.
The contractors who’ll come out of this tariff cycle stronger are the ones who treat coil inventory like accounts receivable. Every roll has a name on it. Every roll has a delivery date. Every roll has a payment behind it.
If you’re running a sheet metal or commercial roofing operation and you want to talk through where your backlog discipline is strong and where it’s leaking, I work with operators on this all the time. Book a conversation at /book-khary/ and we can walk through what your numbers actually say.
About Khary Penebaker
Khary Penebaker is Division President at MetalMaster-RoofMaster, the Upper Midwest division of Wolkow Braker Roofing Corp. He previously built Roofed Right America from startup to $35M+ in revenue with 180 employees (2014-2025) and founded Penebaker Enterprises, growing it from $1.5M to $15M. A gun violence prevention advocate and former Everytown for Gun Safety Fellow, Khary brings two decades of leadership in commercial roofing, architectural sheet metal, and civic engagement.
Common questions
How much coil should I pre-buy against signed backlog?
Only what is sold, scheduled, and funded. If you have 90 days of signed work with known gauge and coating requirements, that is your pre-buy ceiling. Buying beyond signed backlog turns coil from inventory into speculation, and speculation should never be financed on a roofing operating line.
What is the carrying cost on warehoused steel coil?
Plan for 35 to 60 cents per square foot per month in Midwest warehouse rent, plus 9.5 percent annualized interest on the cash tied up, plus insurance and shrink. On a 42,000 dollar coil held four months, the carry runs roughly 1,500 dollars before any rent. Most contractors lowball this number.
Can I pass pre-buy savings to customers and still hold margin?
Yes, if you treat the spread as a closing tool. Use part of the savings to undercut a competitor's bid while still booking better margin than they would have. Pocketing the full spread on work you would have won anyway is fine, but the smarter play is winning bids you would have lost at spot pricing.
What happens if tariffs come down mid-year?
Speculators eat the spread. If you bought coil at the 50 percent tariff price and tariffs drop 20 points, your inventory is suddenly above spot market and customers without escalation clauses will push back. Contractors who matched coil to signed contracts at locked rates are unaffected because the trade is already closed.