SMU Data and Models

Steel Buyers Basics: Defective Steel

February 15, 2014

For the last couple of weeks we have been discussing various kinds of ethical issues that come up in the steel business. This week we will deal with the issue of when flat rolled steel is rejectable. Buyers and sellers often find that they disagree about the quality of the steel. Generally this problem is exacerbated in times of falling prices — buyers often find that what was acceptable in a rising market is no longer acceptable in a falling one.

When steel can be rejected and why can be both a technical and ethical question. There are times, especially when prices are falling, when company’s attempt to change standards and reject steel that was fine when prices were rising. Our response to buyers is they must defer to the standards that are in place when the steel was purchased. This includes mill terms and conditions as well as ASTM standards and then the standards agreed to in negotiation between the buyer and the supplying mill.

The following is an excerpt from Section 5 (Specification Variations) of US Steel’s online statement of terms and conditions:

“Except in the particulars specified by Buyer and expressly agreed to in a writing signed by Seller, the goods furnished hereunder shall be produced in accordance with Seller’s standard practices. All goods, however, including those produced to meet an exact specification, shall be subject to Seller’s mill tolerances and variations consistent with good mill practice in respect to: (a) dimension, weight, straightness, section, composition and mechanical and/or physical properties; (b) normal variations in surface and internal conditions and in quality; (c) deviations from tolerances and variations consistent with practical testing and inspection methods; and (d) regular mill practice on over and under shipment.”

What are Seller’s standard practices? For the most part these are detailed in ASTM International steel specifications. These specifications detail (generally in excruciating detail) all of the tolerances (both English and Metric) for various types of steel. For instance, the ASTM specification for galvanized steel is A653/A653M. Within this specification, there are additional specifications referred to, most notably A924/A924M, which defines the general physical tolerances for coated steel.

When an order to a mill is placed, generally the relevant ASTM specification is called out. Unless otherwise detailed by the Mill, any quality in the steel that varies past what is detailed in the ASTM spec makes the steel defective.

These specifications are available online at a cost. However, if you ask, your supplier should be able to share a copy — every steel buyer should have these specifications on file.

For instance, the flatness of galvanized material over 0.032” thick under 10 feet long must be within 1/8” of a horizontal surface and over 10 feet long must be within ¼” of a horizontal surface. Another example; G90 material must have a minimum of 0.90 oz/sq ft of Zinc on both sides (triple spot test) but may be as low as 0.32 oz/sq ft on any one side. There is no specification for the spangle size (or consistency of the spangle).

Despite the detail in these specifications, not every aspect of steel is covered – especially those aspects that are related to appearance. The understanding of what appearance is acceptable and what is not is part of the relationship that buyers and sellers should develop. Generally, the rule we suggest is that steel that does not meet the ASTM spec is defective and rejectable. If a buyer could find a use for such defective material then they have the right to negotiate a price concession from their supplier.

On appearance issues, you should expect that the Mill would produce a consistent looking product and if they did not the material was rejectable despite the lack of a specification. However, you need to remain consistent in both up and down markets.

In the end these issues often came down to the type of relationship a buyer has with their steel supplier. Buyers should realize that their suppliers make it their business to know how trustworthy a buyer is and price their steel accordingly.