Steelmakers should use derivatives, says Renault-Nissan executive

Article by Christian Andrei, on June 17, 2011

Renault-Nissan deputy general manager, Nicolas Fourrier, of supplier account office, told Reuters that steelmakers should utilize derivatives to manage their input costs in order to give their customers, like the automakers, the long-term price stability they need.

He added that those steel suppliers that successfully use hedging instruments and offer long-term price contracts are more likely to obtain customers.

He also stated that the development of liquidity in the iron ore derivatives market could give opportunities to steel mills to give longer term prices to the customers.

BHP Billiton, Vale and Rio Tinto, which are the three iron ore producers, rejected a decades-old annual pricing scheme in favor of quarterly pricing last year.

While pricing for iron ore, which is a core ingredient in steelmaking, becomes more flexible, steelmakers are pushing for shorter-term steel pricing mechanisms to transfer price volatility to customers. However, the customers are resisting frequent price reviews because higher volatility would make it more difficult for them to manage costs.

This year, Renault-Nissan agreed with steelmakers to review steel prices twice a year but states that more frequent price reviews would be unacceptable. Fourrier disclosed that any shorter period will cause accounting problems, and going more than six months is not possible.

He added that Renault-Nissan is not going to hedge coking coal or iron ore because it is not directly involved in these markets.

On the other hand, Volkswagen AG is studying the use of steel derivatives to lock in materials costs and protect margins, Michael Wagner, who is the company's head of treasury commodities trading, told Reuters in an interview last Tuesday.

Topics: renault, nissan

If you liked the article, share on:


Login or Create new account to add a comment!


Mitsubishi is now officially part of the Renault-Nissan alliance after Nissan took over the Japanese car company recently. We know a lot has been happening in the car industry, but...
by - October 24, 2016
Driving the newest 2017 BMW 5-Series (G30), Clive Owen (Closer, Children of Men) returns to his role as “The Driver”. In this latest installment, what initially starts as a simple...
by - October 24, 2016
Many had wished that a Lamborghini Huracán Superleggera would somehow make a surprise debut at the recently held Paris Motor Show. Sadly, not a single Lamborghini appeared anywhere in sight....
by - October 24, 2016
Aston Martin and Red Bull Racing teamed up for the first time in creating what looks like one of the most ferocious beasts in history. The British car manufacturer has...
by - October 24, 2016
German premium carmaker Audi is reportedly planning to buy back around 25,000 Audi Q7 SUVs powered by its 3.0-liter V6 TDI engine in the United States. The buyback should compensate...
by - October 24, 2016