Industry sources said that major Japanese steelmakers are in final talks with automakers to raise steel prices in the April to September first half of fiscal 2011 by more than JPY 10,000 per tonne from the previous six months due to increased raw materials prices.
The hike in steel prices is expected to increase auto production costs by more than 10,000 yen per vehicle and affect the earnings of automakers currently recovering from sharp output cuts caused by the devastating March 11 earthquake and tsunami in northeastern Japan.
The sources said that it will be difficult for automakers to pass on the steel price hike to vehicle prices.
Nippon Steel Corp had first requested a steel price increase of around JPY 15,000 per tonn in negotiations with Toyota Motor Corp. But they are now expected to agree on a price hike of a little more than JPY 10,000 the largest rise since an increase of around JPY 20,000 n the first half of fiscal 2010.
Sources added that JFE Steel Corp is also negotiating with Nissan Motor Co to raise steel prices by a similar margin.
Raw materials prices for steel products have hit all time highs in the April-June quarter, including around USD 170 per tonne for iron ore and USD 330 per tonne for coking coal, as demand from fast growing China has continued to rise.
In response, steelmakers had expressed plans to raise steel product prices by around 20,000 yen per ton before the March disaster. As the March disaster has affected auto production, however, they have lowered the steel price hikes being negotiated with automakers.
( Source: www.steelguru.com )