Toyota to increase steel price for suppliers by 12%

Article by Anita Panait, on August 26, 2013

Toyota Motor Corp. will hike the price of hot-rolled steel it sells to suppliers by 12 percent in the second half of the current fiscal year by JPY8,000 ($81) a ton to JPY74,500 ($757), three people privy with the matter told Bloomberg. Toyota has notified suppliers of the plan. Toyota purchases steel in bulk and resells it to its network of auto parts makers for production use with a partial aim to help them cut costs and reduce the risk of currency swings, according to researcher IHS Automotive.

Toyota’s move is expected to raise a benchmark used in Japan’s auto industry, since smaller steelmakers in the country typically use the carmaker’s steel price to suppliers as a reference for their transactions, according to Takeshi Irisawa, an analyst at Tachibana Securities Co.

The price increase shows that Japanese carmakers and their suppliers are sharing some of their gains from a weaker yen resulting from the so-called Abenomics. On the other hand, steel producers are struggling with higher import costs for raw materials.

Nippon Steel & Sumitomo Metal Corp. inked a deal with Toyota in July to raise increase steel prices by JPY10,000 per ton for the first half of the year ending March 2014, the Nikkei reported last month.

That marked the first increase in steel prices in two years. Toyota’s suppliers purchased steel from the carmaker at a discount in the past two years. According to Bloomberg’s sources, Toyota offered a discount of JPY8,000 in the first half of the fiscal year compared with the second half of the previous fiscal year. [source: automotive news - sub. required]

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