Price negotiations between Japanese steel and car makers due to begin later this month over this year’s steel prices promise to be some of the most fractious for years, the Financial Times (FT) said.
Profits made by Japan’s top five vehicle makers reflected buoyant sales and cost cutting and contrasted sharply with most of corporate Japan, the FT said.
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The newspaper said that the steel industry, forced to cut prices by up to 20% as car manufacturers sought to pare raw material costs, now plans to insist the automakers loosen their stranglehold on the industry pricing structure.
The FT said that it understood that steel makers were planning to ask vehicle makers to increase prices they pay for steel by between 10 and 20%, but there were few signs they would receive a sympathetic hearing.
“There must be something wrong if all steel makers are bleeding red ink while the car industry is making profits,” one steel industry official told the Financial Times.
All but Kawasaki Steel reported losses last year, the FT added.
“Japanese steel makers are not exactly the most efficient companies in the world,” responded a top five car company executive in an interview with the FT. “The steel makers must address their own cost base first, and then if they have a problem with profitability, we’ll take a look at it.”
The FT said that car makers believe that massive overcapacity in Japan’s steel industry, combined with numerous other inefficiencies, give the steel makers ample scope to reduce their own costs.
“We say they can change,” the car company executive told the Financial Times.
