The flared end of the exhaust pipe on the riser. If it is touching your exhaust hose, it will eventually burn thru.

any off angle exhaust water hose installs will block that portion of water flow thru - it gets hot and starts to blister burn from the inside out. Very common with off angle exhaust water hose installs. Merc in all their manuals with exhaust installs warns and even picture wrong and right installs for the water hose.

This holds true for all marine water jacked marine exhaust with exhaust water hose connections

What is that flange made of ? Is belting it with a hammer the best fix ?

They make an exhaust hose with a bell on it to give a little extra room for out of alignment exhaust . I had the same issue after aligning my engine. the hose I am talking about goes between the riser and Ypipe for the silent choice. You could also grind off about a 1/4" of the bell where it is touching