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October 2007
GRADE EXPECTATIONS: LIFE AFTER 304
By: Janice Cha

Type 304 stainless steel has been the star of foodservice equipment manufacturing for a long time. Now, with skyrocketing prices forcing manufacturers to seek alternate grades, you'll be facing new choices when spec'ing your kitchens.

With commodities pricing a hot topic in the news, and costs for 304 stainless steel and its key components rising steeply, it was only a matter of time before we'd start seeing increased pricing for the equipment and supplies made with it.

Fortunately, foodservice equipment and supplies manufacturers have been testing and implementing reliable, lesser priced alternatives for a while now to both lower your costs and their own. Their message now: You can adjust your specs with confidence in the various alternatives to 304 stainless.

Steel Prices Gone Crazy
Type 304 stainless sheet, the most commonly used product for foodservice equipment, shot up 25% in second quarter 2007—this over a first-quarter figure that was already a record, according to Purchasing magazine's quarterly transaction price research and forecast. Compared to only a year ago, the price of 304 stainless had increased more than 140%, with further rises predicted.

The culprit behind the unprecedented run-up has been record-high prices for the "ingredients," so to speak, that give steel its stainless, corrosion-resistant qualities: nickel, molybdenum, chromium and cobalt. Steel suppliers tack on these extra expenses in the form of surcharges.

Nickel, in particular, has been a problem. Until '01, spikes in nickel prices tended to be short-lived—up for two years, then down again. A two-year time span is not enough time for specifiers to complete tests or change manufacturer procedures, according to Peter Fish, an analyst with steel market tracking firm MEPS Int'l., in Sheffield, England. Since '01, however, there have been five consecutive annual rises in nickel prices, with more increases forecast.

The explosion in nickel prices—caused by mine closures, lower production from existing mines, financial speculation and increased worldwide demand—has finally led to a sea change among steel manufacturers and equipment suppliers.

"End-use manufacturers have been exploring, within NSF guidelines, the other steel options available," says John Dobek, president of the stainless and aluminum division at Macsteel.

"The key lies in choosing the right grade of steel, according to end-use and customer requirements. You can't just go out and take the lowest-cost grade and add it to the production line," Dobek says.

What NSF Requires In Stainless
Grade 304 stainless is hardly the only choice for equipment manufacturers. A call to NSF Int'l., the Ann Arbor, Mich.-based food safety organization, revealed that there are a number of 304 alternatives, and as Dobek says, it all depends where and how the steel will be used.

According to the NSF/ANSI 51 Food Equipment Materials standard, stainless steel used in food equipment should be "AISI 200, 300 or 400 series alloys or equivalent." Steel that would be used in a food zone (i.e. coming in direct or incidental content with food), must have a minimum chromium content of 16%. (Chromium is the key element in stainless steel that gives it such high corrosion resistance.)

"Grade 304, with 18% to 20% chromium, fell right in the middle of that category. That didn't mean it was the only steel to use, but it certainly became one of the most common in foodservice," explains Mike Kohler, technical manager for NSF. "As stainless steel and nickel prices have risen, some manufacturers have begun using 200 or 400 series. As long as the material includes 16% chromium, manufacturers can reduce the nickel content and still meet NSF criteria."

And there are new low-nickel and nickel-free alloys being developed by overseas steel producers that are not yet in the AISI series, "but as long as they meet the 16% chromium criteria and all other ingredients are in compliance with NSF/ANSI 51, they would also be acceptable," Kohler adds.

Manufacturers Test Alternatives
Equipment manufacturers in particular have been acutely aware of the surcharge pricing issues. Testing alternatives, educating customers and adjusting specs have occupied much of their time over the past few years.

For example, equipment and smallwares suppliers Vollrath Co., Sheboygan, Wis., spent two years analyzing and testing more than 10 different metallurgies, comparing results against 304 (8% nickel) as the standard. Steel grades tested ranged from compositions with 6% nickel (301) to those with zero nickel (430). Test methods included a salt spray, bleach and acid, using the infamously corrosive mustard and sauerkraut.

Vollrath found that for applications such as pots and pans, where food stays in constant contact with the metal at high temperatures, 301 performed as well as pans made of 304. In applications with incidental food contact, such as in countertops and covers, 200 series stainless (4% nickel) performed well. And where stainless steel is used primarily for aesthetic purposes, a 400-series stainless with no nickel was found to be acceptable.

"We believe that the new standard for most smallwares will be 301 stainless containing 6% nickel," says Vollrath CEO Tom Belot. Franke Foodservice Systems is also moving away from 304 so as to take the cost risks of nickel out of the equation for customers.

"The surcharges have been just insane," says Tom Campion, president of the LaVergne, Tenn., manufacturer. "[However, by using] 201, with only 4% nickel, versus the 8% nickel of 304, there's much less price risk involved."

Franke engineers reached that conclusion after extensive testing. "We examined 201, 301, 304 and some of the 400 series materials, including 430. The 400 materials didn't really work for us. But in the austenitic steel grades, 201 presents just the right amount of chromium. You can cut it, weld it, form it and polish it," Campion says. "We feel that using 201 across the board is the way to go."

Time To Re-Adjust Specs
So the bottom line from here on out is this: The days of 100% 304 stainless steel equipment—and specs—are over.

"If you're buying U.S.-manufactured equipment, you should know that U.S. manufacturers have been reluctant to change grades until extensive testing was done," says one steel industry authority. "In the past five years, they have been running exhaustive numbers of tests. You may get an oven with 430 on the back, 304 on the front and some other grade on the interior that ensures optimum heat transfer, and it'll be a perfectly good oven.

"Keeping to 100% 304 specs these days would make for an unnecessarily expensive, over-spec'd piece of equipment," the expert adds. "It's time to change specs."

A Primer On Steel Surcharges, Grades
The three-month trend for July through September 2007 shows surcharges edging lower for four types of steel commonly used for foodservice equipment. Yet despite the dip, "the surcharge for 304 is still extremely high compared to other grades,"says John Dobek, president of the stainless and aluminum division for Macsteel, one of the country's ma-jor stainless steel distributors.

Starting with the base price for 304 stainless—typically less that $1/lb.—adding the surcharge can easily double or triple the net cost to a manufacturer, depending on the commodities pricing of the moment. So "a manufacturer looking for an alternative to September's $1.53/lb. surcharge on 304 stainless would, for a 10,000-lb. order, save $5,600 by choosing 201, $3,400 by choosing 301, or $12,800 if the company opts for the nickel-free 430," Dobek says.

So there are viable, money-saving alternatives, but before you spec out a kitchen with any of them, be sure you know what the various steel grades offer.

Austenitic, or 300 series, stainless steels make up more than 70% of total stainless steel production. They contain a maximum of 0.15% carbon, a minimum of 16% chromium and sufficient nickel and/or manganese to retain an austenitic structure at all temperatures from the cryogenic region to the melting point of the alloy.

A typical composition of 18% chromium and 8% nickel, commonly known as 18/8 stainless, is often used in cookware. The 200 series of steel is an austenitic chromium-nickel-manganese alloy.

Ferritic stainless steels are highly corrosion resistant but less durable than austenitic grades. They contain between 10.5% and 27% chromium and very little nickel, if any.

Martensitic stainless steels (400 series) are not as corrosion resistant as the other two classes, but are extremely strong, highly machinable, and can be hardened by heat treatment. Martensitic stainless steel contains 12% to 14% chromium, 0.2% to 1% molybdenum, zero to less than 2% nickel, and about 0.1% to 1% carbon.

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