Let's run with your idea. The item expands, no matter what.
Crushing a load of nails will deform them, to be sure, but 10 cubic feet of iron can't be crushed smaller than 10 cubic feet. There is no give there.
So is this a source of unlimited physical force? Topple mountains, uproot trees, move the pyramids type power?
Or, to put it in scale, what happens to the we stuffed with far too much iron. Does it burst, like a pipe bomb?
I could see pipe made of a metal like copper stretching and tearing. It's malleable that way. Cast iron, on the other hand, breaks before it bends. It would hold form for as long as it could, then fracture.
In the real world, when a pipe breaks from internal pressure, it tends to go like a balloon. That is, contain it for as long as it can, then spit and tear and blow apart. Whether it's a piece of PVC irrigation line or a cast iron water main, when they blow they go like small bombs. And, of course, the classic "too much pressure to hold" is the pipe bomb. The hard container concentrates the release of pressure, holding it in and letting the pressure build, then releasing it all at once. Firecrackers just fizzle if they're split open and lit. It's the wrapper that holds the pressure in for a moment that makes it go "pop".
So are we talking shrapnel? Damage? Or is this more like a slow motion expansion, like a hydraulic jack? How long can you delay the expansion?
To me, getting unlimited oomph out of a chunk of iron and a 3rd level spell seems too much. Same for getting pipe bomb effects. YMMV, of course.