Toyota told its suppliers that it will lower the price of the steel products

Article by Christian A., on August 25, 2010

Sources say that Toyota Motor Corp. has informed suppliers that starting April 1, it will lower the price of the steel products it sells them by as much as 9%. Toyota has yet to complete price negotiations with top steelmakers, including Nippon Steel Corp. for the business year starting in April.

As a result, this action is attracting much interest as it is an unprecedented step that is likely intended to limit the anticipated price hikes by steelmakers. These sources added that Toyota told suppliers that its selling prices could be readjusted later, depending on the negotiations.

Historically, Toyota gets a better deal by purchasing steel on behalf of its suppliers. The carmaker sets the benchmark for steel price negotiations at other Japanese automakers.

Toyota then informs suppliers of its selling prices after agreeing on prices with steelmakers. Sources told Reuters that Toyota plans to reduce prices of hot-rolled steel by about 9% to 69,500 yen ($769.50) a ton from 76,500 yen.

In turn, Toyota will pay an equal 7 yen/kg less for the components it buys back from suppliers. In the latest annual negotiations, it came out that Japanese steelmakers are considering transferring at least part of the Chinese demand-led rise in raw materials prices to end-users.

But since car sales in Japan are slow, the carmakers are hesitating to pay more for steel in Japan. The sources have the opinion that Toyota is informing suppliers of its intention to cut prices, in an attempt to influence negotiations with steelmakers. Toyota has yet to make an official statement on the matter.

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