Steelmakers should use derivatives, says Renault-Nissan executive

Article by Christian A., 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:

Comments

Recommended

During the North American International Auto Show at Detroit in 2015, Hyundai introduced a concept pickup truck they named the Santa Cruz. This model took home the Concept Truck of...
by - August 23, 2017
Porsche introduces the technologically advanced wheels with braided carbon fiber. These will be initially available on the 911 Turbo S Exclusive Series. Being the first car manufacturer to offer such...
by - August 23, 2017
All eyes were turned to the fuchsia pink bespoke McLaren 720S MSO at the 2017 Pebble Beach Concours d’Elegance Sunday. Surely, we can understand why. The one-off supercar, which was...
by - August 23, 2017
Hyundai Motor Group – including both Hyundai Motor and Kia Motors – has disclosed a wide-ranging plan to introduce 31 environment-friendly models in a new development roadmap that aims to...
by - August 22, 2017
Over a decade ago, Pagani took the Zonda to the Geneva Motor Show. The Zonda hypercar was then set to retire in 2013 together with the track-focused Revolucion. But here...
by - August 22, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries