Without knowing what is causing the corrosion, it is difficult to make a determination.  However, 316 stainless is marginally more expensive (~20% more expensive) than 304 and has higher corrosion resistance.  That would be where I would start.  If that wasn't acceptable, 347 might be my next best guess, but it has another jump in price over 316.

Is the sheet cold rolled? Has the sheet been pickled and passivated? Have you determined the mechanism of corrosion; e.g., crevice, pitting, general, intergrannular?  

Call your vendor - they can be a wealth of info!!

My hunch is that the rust is superficial from the punching and handling.
Passivation after forming would eliminate this.
What is the max operating temp?
As long as it is under 600F you might look at using 2205.  It is close to the same price as 316 and is much stronger and has much higher corrosion resistance.

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Plymouth Tube

Possibly something in the filter that might be corrosive (e.g., chlorides)?  That could cause something resembling corrosion under insulation.  Think of the paper products industry as one giant disposal method for small contaminants of all sorts.   

You need to define the environment and the form of corrosion better before considering a material upgrade.  There is not usually a silver bullet solution to corrosion, and sometimes less is more (man am I thick with clichés today).   

Brimstoner,

While I do not disagree at all with your assessment of the paper industry, I find it hard to make the leap from locomotive air cleaners to the stench of a paper mill.  Help me make that trip?

rmw

Thank  you all for the inputs. I dont think part  was  passivated after formation. What is passivation and how it is done? How costly the process? I am attaching photographs of the rusted area.Please see whether some conclusion can be arrived at.

• http://files.engineering.com/getfile.aspx?folder=08720f30-2af0-4628-8ca3-bf

Could be a lot of things.
The rust around the fasteners makes me suspect that they are plain steel.
Does it clean off?  Use a flap wheel and see what it looks like underneath.  If there isn't any pitting then it is all superficial and should clean up.
No, passivation isn't hard.  Warm nitric acid for an hour, or hot citric acid for 12 hours.

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Plymouth Tube

In addition to what Ed said:  the corrosion along the bend line looks like some iron embedment from the bending press/brake; this will likely improve by pickling/passivating as Ed suggests.

I agree that the problem is most likely iron contamination during the forming processes. You may not need to go to a pickling process however. I would first try an aggressive sand blast. We have had good success with a crushed garnet blast on stainless steel castings.

Bob

You clearly have a contamination issue. Do you interchange materials (carbon and low alloy with stainless steel) on the same processing equipment? If so, how do you clean the equipment between processing of carbon steels and stainless steels? Develop appropriate protection/cleaning procedures for materials changes.