Japan Major Steels, Toyota Agree to Cut Steel Price by 15,000 yen/t

Nippon Steel and other major Japanese major steel makers apparently agreed with Toyota Motors to reduce the steel products selling price by around 15,000 yen per tonne. They don’t disclose the individual transactions but according to industry source around Nagoya said Toyota noticed to parts makers on Thursday the firm reduces price by 15,000 yen for parts materials supplied by Toyota to the parts makers. The automotive steel price decreases for the first time in 7 years to reflect lower cost for raw materials including coking coal.

The automotive steel price plunged in 1999 when Nissan Motor squeezed the suppliers aggressively. However, the price increased since 2003 due to growing steel demand, tight steel supply and higher raw materials cost. The price increased by 28,000 yen per tonne in 2008 due to extremely higher raw materials cost and the price exceeded 100,000 yen per tonne for the first time.

Automakers’ operation rapidly decreased since late 2008. Toyota announced operating loss estimation for the year ending March 2009. Japanese automakers try to reduce the inventory and improve the operation rate in and after May. However, automakers try to reduce the steel price when the demand condition is uncertain.

Japanese major steel makers are also in major production cut while they have to use higher cost of raw materials for more months. The makers apparently accepted certain price down when they got 57% price down for hard coking coal.