Nippon Steel Gets Near 20,000 yen/t Hike from Toyota for 1H F2010

Nippon Steel agreed with Toyota Motor by Tuesday to increase steel price by near 20,000 yen per tonne for April-September from annual price in fiscal 2009 ended March 2010. The price increases for the first time in 2 years. Toyota apparently notifies higher steel price for materials purchased by Toyota to supply to parts makers as early as next week. With the agreement with Toyota, Nippon Steel will agree with other automakers for higher price. The price negotiation could impact on talks with other steel users including shipbuilders, appliances and electric machinery makers.

Integrated steel makers’ raw materials cost increased to around 2 times for iron ore and by 55% for coking coal in April-June from annual price of fiscal 2009. The cost increases by around 12% for coking coal for July-September from April-June while iron ore majors seek around 30% hike for the quarter. An official of Japanese integrated steel maker said the cost will increase by 1.5-2 trillion yen for Japanese integrated steel makers.

Nippon Steel sought steel price hike by around 15,000 yen per tonne for April-June and additional around 10,000 yen for July-September to automakers including Toyota citing the extremely cost up is much higher than the cost cutting effort. Toyota resisted the wide hike when the firm posted first profit in fiscal 2009 in 2 years but the higher steel price pressures on the profitability while Toyota resisted the quarterly pricing due to the unstable cost structure. However, Toyota finally accepted the steel price increase and shorter pricing term when raw materials cost squeezes steel makers’ profitability.

Toyota’s steel cost increases by around 64 billion yen for 3.2 million units of domestic production plan in fiscal 2010 based on around 1 tonne of steel consumption per a vehicle.