We have a Colchester magnum at work, the steady is the same design as yours just bigger. No matter how much care and attention i put into setting the steady it always leaves a mark and makes little flakes like in your picture. I think there is a design or manufacturing flaw with their steadies. The marking you have on your bar is pretty bad and I would agree with the others that it is partly caused by the bar running out/ steady not set properly. On another not if any of you ever see a Colchester Magnum for sale don't buy one, they are the worst lathe i have ever operated.