This issue occures only with Rubidium 0.7.1. Removing the mod fixes the problem.
Tetra version 6.0.0, mutil (Tetra library) version 6.1.1.

Making any tool / weapon modular (by just adding binding / replacing material), makes that tool's icon and model to appear iron-ish instead of using right color scheme for tool materials.

What's wrong on screenshot: there is diamond axe in the workbench, diamond sword in the last slot of my hotbar and netherite hammer in 5th hotbar slot.

I already opened an issue in Tetra's github tracker - mickelus/tetra#764 .

I experienced the exact same issue when I tried to add Tetra to Valhelsia 6. Will update here if I find a solution.

Edit: couldn't figure anything out so just ended up going without Rubidium. There wasn't much I could do.

For anyone looking for workaround, the issue is resolved in Embedium 0.2.8 (https://github.com/embeddedt/embeddium/wiki/Changelog#028).