A serious steel shortage at Japan’s top car makers is expected to benefit South Korean and Chinese suppliers, while signalling more bargaining power for the steel industry in price talks with their biggest customers, Reuters reported.
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The auto industry has been talking of a global scarcity of steel for over a year, but the crisis gauge notched up to new heights after Nissan Motor said on Thursday it would have to suspend production at several domestic plants because it didn’t have enough of the metal, the news agency noted.
Reuters said a Japanese business daily reported on Friday that Toyota Motor planned to buy more metal from South Korea’s POSCO on the expectation that supply in Japan would stay tight for a while.
“When Japan used to have five blast furnace companies, its auto makers used to take advantage of the competition,” Kim Gyung-jung, steel analyst at Samsung Securities in Seoul, told Reuters. “Now steel makers have a greater say on the prices since there are only two, which meant it was a matter of time before Japanese carmakers increased steel purchases from POSCO in an effort to keep a check on local (Japanese) steel firms,” he added.
POSCO, the world’s fifth-largest steel maker, reportedly said it would supply part of an emergency supply of steel that Nissan requested as long as that didn’t disrupt supply to South Korean carmakers.
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By GlobalDataReuters said that, despite a more than 50% surge in spot steel prices this year due to a shortage of raw materials and China’s racing economy, steel makers had struggled to pass on the price hikes to auto makers, which are reluctant to raise their product prices out of fear of losing customers to rivals.
Analysts told the news agency the latest fallout at Nissan could be payback for its tough stance in the past.
“Nissan led a steel price drop in 2001-2002 when there was an oversupply problem,” Samsung Securities’ Kim told Reuters. “I think this, more or less, is why Nissan became the first to suffer a shortage.”
Reuters noted that Japanese auto makers have long avoided using South Korean and Chinese steel due to quality issues, but POSCO’s deal with Nissan could signal the start of a new trend, analysts reportedly said.
“Carmakers are boosting production in China, Indonesia and Thailand, but steel is procured almost entirely from Japan,” Koji Endo, auto analyst at Credit Suisse First Boston Securities in Tokyo told Reuters. “They’ve got to start sourcing locally.”
South Korean analysts told the news agency POSCO’s deal with Nissan could help it expand its reach in Japan, and to Nissan’s rivals.
