When a customer terminates a contract and has a balance due and custom order non refundable material that was pending delivery and he refuses the delivery because he doesn't want to pay for the material even though its custom order and cannot be returned to our supplier can I legally charge storage fees for that item so that when he finally pays off the balance the material will be released to him?
Whether or not you can assess storage fees may be dictated by the terms of your contract with the purchaser. If there are no provisions that could be interpreted to deal with this type of breach, general contract principals would apply. Under general contract principals you are entitled to damages proximately caused by the purchaser's breach of contract, but you have a duty to mitigate those damages to the extent possible.
In the short term, storage costs likely would be considered a reasonable part of your damages as you have nothing else to do with the items and discarding them might increase rather than mitigate your damages. Further while the purchaser's breach arguably has released you from any obligation to continue to make the materials available to purchase, storing the materials, subject to reimbursement from purchaser, may be the most effective way to minimize your damages if you believe that purchaser will ultimately seek to collect the materials.
But in the longer term it likely makes more sense to try to resell the materials to someone else, even if a discount is required. As long as you act in good faith the minimize your costs resulting from the purchaser's breach, you will have a strong argument for breach of contract damages for the loss you suffer in spite of these efforts.
But again, always start with the contract itself.
If you require legal assistance, email me at ryan@huntortmann.com to schedule a free consultation.