Nippon Steel and other Japanese steelmakers hasve agreed to cut steel prices paid by Toyota by around 10%, a source told the Reuters news agency.
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The cut was smaller than expected and may not hit steel mills’ earnings too much, the report said.
Analysts told the news agency that Toyota, facing a global slump, may however seek a further price cut later this year after steel mills and miners such as BHP Billiton set the price of iron ore.
“The size of the price reduction is far smaller than expected,” Mizuho Securities analyst Hiroshi Matsuda said. “It is hard to understand why Toyota would agree to this price.”
Asian steel prices have more than halved to less than US$500 a tonne from record highs early last year after demand for cars, electronics and industrial machinery slumped, the report added.
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By GlobalDataA Reuters source said Toyota had told an affiliated component maker to cut its assumed steel product price by JPY15,000 (US$151) a tonne from June from an estimated JPY100,000.
The Asahi Shimbun newspaper said steelmakers would slash prices for other automakers too.
Toyota spokesman Keisuke Kirimoto said: “We will work to reduce costs of not only steel but other raw materials in accordance with the market situation” while Nippon Steel declined to comment to Reuters.
Media have reported that the price of auto sheet could fall in stages, allowing steelmakers to cope with two to three months of supply of costly coal carried over from last year.
Goldman Sachs analyst Rajeev Das told Reuters he expected a 10% cut in steel prices would depress Toyota’s operating profit by JPY30-40bn compared to his earlier estimates.
A separate source told the news agency that talks between Japanese mills and miners on iron ore contract prices had made little progress, with mills rejecting miners’ 20% rate cut offer as too small.
Japanese mills feel there is no need to hurry as steel demand is low and their facilities are full of unused iron ore and semifinished products, the source said.
