CONCERNED ABOUT THE PRICE OF STAINLESS STEEL?

Pland is an established Leeds based, manufacturer of stainless-steel products, supplying the commercial market for over 100 years. As the prices of many materials have recently soared in price, we asked MD Steve Duree, who has worked in this market for over 40 years, to explain what’s happening in the world of stainless-steel procurement:

Q: Firstly, what is stainless steel?

Like all other kinds of steel, stainless steel is made primarily from Iron and Carbon in a two-step process. What makes it different is the addition of chromium (Cr) and other alloying elements such as nickel (N) to create a corrosion-resistant product.

Q: What benefits does it offer?

Stainless steel is extremely corrosion resistant. It is also fire and heat resistant, hygienic, strong, durable, is almost 100% recyclable therefore sustainable and looks great. It is also impact resistant and its strength to weight ratio offers an advantage over other materials in certain circumstances.

Generally, the initial cost of producing a product in stainless steel will be more expensive than ordinary steel, not just because of the higher alloy cost but also because it requires more work to shape and form. However, as it offers a lot longer life cycle, lower maintenance, and a high scrap value it is usually considered as the preferred material choice.

Q: Please explain how stainless steel is purchased in the UK?

The Customer normally places an order for the steel and is then quoted a lead time. The product may be in stock, or could be on a lead time depending on size and weight. Stainless steel incorporates at least 18% Chromium and usually 10% Nickel. The Nickel is traded daily as a commodity on the open market. We therefore negotiate annually with steel suppliers a “base price” per tonne of stainless steel and then pay on top of this an AAF (Alloy Adjustment Factor) relating to the Nickel and other trace elements required to produce the stainless steel. If the steel was supplied on a ten week lead time, we wouldn’t know what we are paying until the product was invoiced.  We can usually anticipate what the price is going to be by using indicators like the LME (London Metal Exchange).

Q: Are there different grades and if so, what for?

The most common use of stainless steel is in cutlery, with grades 409 and 430 being used for everyday ware. Sheffield cutlery, long known for its quality, use specially produced 410 and 420 for knives and 304 for spoons and forks. At Pland we largely use grade 304 as it is more ductile and therefore suitable for objects that need to be shaped like sinks and washbasins, two of our core product groups. We also use Grade 316 which is a more corrosion resistant alloy than 304 and therefore more suitable for hospitals or laboratories where chemicals may be used.

Q: Is it sourced from a UK supplier?

In our case steel is sourced predominantly from Mill producers. Often it is imported in ingots to be then rolled in the UK to produce flat products or coils. The steel we use in our processes is thin sheet material of typically 0.9mm – 3.0mm thick. We source different grades of steel suitable for the intended use and this is usually 304, 316, 430 & 441 materials. Where standard stock sizes are available from steel stockholders we also consider these as a source of supply. There are also many finishes to consider such as brushed, bright annealed and dull (2B).

Q: How much in advance do you have to procure stock to ensure supply for manufacture?

This is not an exact science but we do plan our annual usage 12 months in advance and submit intended usage to our chosen partner supplier. Our steel stockholding has increased over the last 6 months by around 25% to ensure continuity of supply.

Q: So, when you order, there is little clarity on what you end up paying?

At the moment unless the product is in stock, we’re at the mercy of suppliers. As with share prices, the intended invoice price may increase or decrease according to market demand and price movements on metal trading.  It’s probable that in the current climate where demand outstrips supply that we will pay more.

Q: Has the price of these materials varied over the past 12 months and how does that compare to the past 2 years?

Over 12 months, the base price of stainless steel is around the same, though the AAF has increased disproportionately. For example, the AAF which might usually be around 50% of the cost has increased by 35-53% depending upon the grade of steel. This equates to around 18-25% increase in overall steel purchases.

Over A two year spread, there was a small reduction in base price but the AAF now reflects an increase of between 53-73%.

Q: Have you been able to absorb some of these increases? Did you hold much stock before they happened?

We have absorbed increases as they’ve occurred for longer than we would have liked since Jan 2020. We are still doing so today, albeit we have announced a market increase of 6% in the new year.

Q: How do you see the fluctuation in price continuing, will it go down again?

Our records show that the AAF has climbed steadily since we had a low point in Mar 2016. The market does have peaks and troughs, but generally it is an upward trend. It’s predicted that base prices will rise for 2022 and the AAF might have reached it’s current peak.

Q: Are there alternative materials that your products could be manufactured from in some areas? And if so, what are the pro’s and con’s?

The alternative materials we often come across are as follows:

Ceramic – for sinks & wash basins – but it’s heavy and easily chipped/damaged.

Solid Surface – for washbasins & worktops – longer lead time and expensive.

Laminate – for worktops – less expensive but shorter life cycle and easily chipped/damaged in heavy duty areas.

It would appear that stainless steel is still the choice for healthcare and catering products and I feel confident that this will remain so.