Outokumpu Coil Americas Changes Freight Equalization Policy

Outokumpu Coil Americas has changed its freight equalization policy to reflect today’s North American stainless flat-rolled supply landscape, differentiating rates among its product offerings.

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The new policy took effect for shipments beginning March 15th.

Freight train with cargo containers passing by
Will Outokumpo Coil Americas’ new freight policy help it sell more stainless steel? Source: Adobe Stock/Oleksiy Mark.

In the world of flat-rolled stainless, most prices are quoted with equalized freight rates broken out as a separate line item. Outokumpu’s announcement is important because the point of equalization has changed for several of its niche products.This change is necessary in a market in which base prices have declined to unsustainably low levels. The realignment of the freight rates was long overdue, but how will this announcement impact the metal buyer?

Ghent? Or Calvert?

For products that Outokumpu competes against other mills to sell, Ghent, Ky., or Calvert, Ala., will be the equalization point. For buyers located closer to Outokumpu’s Calvert mill, than North American Stainless’ Ghent mill, the freight rates could possibly decrease.

Metal buyers in Atlanta, Birmingham, Ala., and Houston, for example, will now be equalized with Calvert, not Ghent. On the other hand, NAS has the advantage in the Midwest and the East down to Charlotte. Much of the stainless volume is concentrated in Wisconsin, Ohio, Minnesota, Iowa and Illinois, all of which are closer to NAS, so Outokumpu will be subsidizing the freight metal buyers pay to compete with NAS.

West Coast Travel Costs

Buyers on the West Coast have often seen a split freight rate policy as imports from Asia have only ocean freight to a port and a short distance to the final destination as in the case with shipments in Southern California. Both NAS (Ghent) and Outokumpu’s (Calvert) mills are both around 2,000 miles to the Los Angeles area, so freight rates should stay the same as they are if the mills are charging the actual cost to ship there when not competing against imports.

Whether NAS, Allegheny Technologies‘ flat-rolled products group or AK Steel adopt a similar methodology, remains to be seen. NAS is the market leader and low-cost producer, but Outokumpu’s Calvert mill has become a factor.

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The niche products are a completely different story. Outokumpu’s Calvert mill will be the point of equalization for its 72-inch-wide products, which is justified as Calvert is the only North American mill producing 72-inch-wide continuous mill plate (CMP) and cold-rolled stainless. The greatest impact to the metal buyer will be in bright annealed 48-inch-wide and in rolled-on products. The new point of equalization will be San Luis Potosi, Mexico, where Outokumpu Mexinox produces bright-annealed and rolled-on. Bright-annealed products in 36-inch wide will be equalized with AK Steel’s Coshocton, Ohio, facility.

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