What Outokumpu’s New Freight Equalization Policy Means to Buyers

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Below is Stainless Analyst Katie Benchina Olsen’s review of the products affected by Outokumpu Coil Americas’ new freight equalization policy.


Using Chicago as an example, the change in freight equalization rates means that service centers and large end users will be paying for the freight for 72-inch wide on Outokumpu Coil Americas‘ Calvert, Ala., mill’s almost 900 miles compared to around 300 miles from Ghent, Ky., where North American Stainless is located. For the metal buyer, the only other options for 72-inch-wide continuous mill plate and cold-rolled stainless are TISCO, Aperam and Outokumpu’s European facilities.

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TISCO will not be a factor in cold-rolled 72-inch-wide due to the anti-dumping and countervailing duty actions that the U.S. mills filed earlier this year. Unless you buy for facilities on the East Coast near a port, this new freight policy should remain intact. On another note, Outokumpu should consider its premium on 72-inch-wide. I wrote in a previous posting that the U.S. domestic market for 72-inch-wide wide could grow if the premium over 60-inch-wide was dropped. Perhaps Outokumpu should consider optimizing its 72-inch cold-rolling mill by increasing the production of 72-inch-wide.

Bright Annealed

Bright-annealed, 48-inch-wide products now are equalized based on an 1,800 mile trip from San Luis Potosi as opposed to the 400 miles of Allegheny Technologies’ Louisville, Ohio, facility where ATI produces its bright-annealed.

Surprisingly, 36-inch bright-annealed is being equalized with AK Steel’s Coshocton, Ohio, facility. In my opinion, all of the bright-annealed should have been equalized with Mexinox or with other importers.

Whereas Outokumpu indicates ATI is not competition in 48-inch bright-annealed, it acknowledges AK Steel as competition in 36-inch bright annealed. ATI’s Louisville facility produces other, higher-value products so stainless bright annealed is not as attractive to make as titanium.

AK’s Coshocton facility is typically always full and services markets in which Mexinox does not compete. The 430 and 304 bright-annealed markets are dominated by the Asian mills with some imports coming from Aperam, ThyssenKrupp Acciai Speciali Terni, and Outokumpu Nirosta. I think metal buyers need to be aware of which mills compete against Mexinox bright-annealed to determine what the freight equalization point should be. The landscape will change once NAS ramps up its bright-annealed line in March 2017.


Mexinox Rolled-On customers may be the most impacted by the change in freight policy. Allegheny Technologies Inc., NAS, AK Steel, Aperam, Outokumpu Nirosta and ThyssenKrupp AST have competing products, but Mexinox is the only consistent source of the product for North America.

Furthermore, each company has a slightly different look. Unlike a mechanically polished finish, the rolled-on finish is embossed onto the stainless at the skin pass line and uses a bright-annealed substrate. For manufacturers requiring two good sides with the polished finish look or a highly consistent finish, this product had been much more economical than mechanically polished on two good sides.

Vent hoods and elevator panels are two applications which are well-suited to rolled-on. As the surface is not abraded, the corrosion resistance properties are better than 430 polished and similar to 304 polished based on Mexinox’s research.  Even with the increase in freight rates, 430 rolled-on should remain a better value than highly controlled polish finishes or two-sided polishes, or 200/300 series polished.

Mexinox dominates the 430 rolled-on market in North America. None of the other domestic mills are actively marketing the product. NAS will not be making its rolled-on products until it completes it bright-annealed line. Outokumpu will run the risk of opening the door to 430 polished in any 430 rolled-on application in which the rolled-on attributes are not crucial to the quality of the final product.

Of all the changes to equalized freight rates at Outokumpu, the rolled-on and 72-inch-wide change should stick. The bright annealed freight policy has some maneuverability as there are numerous import options. Although some metal buyers may argue that Outokumpu is nickel-and-diming its customers after a series of base price increases, the underlying methodology is sound.

Transportation companies have been squeezed for years from steel companies trying to keep costs down. Many trucking companies would place steel on the bottom of the list of preferred products to haul and deploy their assets to other industries which pay a premium to steel. Freight is much smaller percentage of the cost of stainless steel compared to carbon steel.

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Even so, that extra $0.03, $0.05 or $0.08 per pound increase tacked onto stainless steel can be difficult for a metal buyer to absorb, but the fact is that freight is a true cost to the mills and needs to be passed on to its customers. In a competitive market, mills must freight equalize with their competition. In markets where there is no competition, such as in rolled-on, the only producer’s costs should prevail for the health of the industry.

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