Stainless steel is a special version of steel which main characteristic is corrosion resistance. This resistance is achieved by adding various alloying elements such as chromium, nickel and molybdenum. Respecting strictly the definition of the European standard EN 10020 - steel which in the total volume contains at least 10.5% chromium and a maximum of 1.2% carbon may be classed as stainless steel. Stainless steel is mostly used as the flat product (hot and cold rolled sheets and coils), and it htat form makes 82% of its total sales. The remaining 18% refers to long products such as bars, wires and profiles of stainless steel.
In the production of stainless steel, alloying elements (chromium, nickel and molybdenum) significantly influence the price of the final product. The difficulty in dealing with them is in the fact that the prices of these elements are determined on the metal exchanges (LME) which is based on the real needs (as well as various speculations) and are changing on a daily basis. Regarding their volatility is difficult to determine a basic price that wouldn't be too low or too high ... This is the reason why stainless steel producers decided to divided prices on fixed part - the basic price and a variable part - the alloy surcharge.
Therefore, the alloy surcharge is the variable amount added to the basic price of stainless steel and reflects the actual price ratio of alloying elements on the world market.
Stainless Steel Alloy Surcharge 1.4301 for December 2016 is 1.196 €/t
Monthly alloying surcharge for flat products - 2016. (€/t)
Alloy surcharge was in some cases even an excuse for the unreasonable price calculations, therefore the European institutions decided to bring order to this area. According to the agreement in 1998, the alloy surcharge is calculated by the producers of stainless steel in the following way:
the average price of nickel, ferrochrome and molybdenum is calculated for last two months preceding the month that was before the one in which alloying surcharge is calculated. (It means that for the alloy surcharge in October, the average price in July and August is calculated)
the result is then compared with the basic prices of February 1994:
for nickel: 3.750 €/t
for ferrochrome: 777 €/t
for molybdenum: 5.532 €/t
if the difference between the average price and the basic price is positive, the alloy surcharge is calculated for that month (The difference is multiplied by the share percentage of each alloying element in stainless steel. )
if the price difference is negative, the alloy surcharge is 0, which means it is not added to the price,
Regarding the fact that the prices of alloying elements began to fluctuate more and more, in 2007 the formula for calculating alloy surcharges was changed. Since then, for the calculation of nickel, ferrochrome and molybdenum, the prices of last three weeks before the date of calculation are taken, and the alloy surcharges for the current month must be published no later than the 24th of the month before. They are mostly published around the 20th. All other parameters remain unchanged.
This change is explained as a desire to give a realistic market price of stainless steel to the end users. Finnish producer Outokumpu went a step further - to maximally reduce the risk of fluctuating prices of alloying elements, they offered the alloy surcharges on a daily basis.