Japanese steelmaker Nippon Steel will increase the price of automotive steel for deliveries to Toyota plants by an average of 40,000 yen (about $289) per ton in the second half of the financial year in October-March. This increase was the result of the latest round of negotiations between the two companies, according to Japanese media.
This will be the biggest price increase in the history of the two businesses. The planned price increase means a jump of 20 - 30% from current levels.
The Nikkei notes that Toyota is Japan's largest buyer of steel and its purchase price serves as a benchmark for contracts in industries ranging from shipbuilding to home appliances. Therefore, price increases can be felt in many business sectors in Japan.
Toyota and Nippon Steel review prices every six months, depending on the changing cost of iron ore, coking coal and other raw materials. The current increase will be the third in a row.
Coking coal broke all price records in the April-June quarter, up 30% from January-March. Iron ore was also at a high historical level.
Palladium, used in catalytic converters, rose more than 10% in late August from a recent low in July. Toyota expects material costs to increase by 1.7 trillion yen in the fiscal year ending March 31, 2023.
Toyota has responded by raising the price of its vehicles in some markets such as the US. But in Japan, they have remained at the same level, even though competitors such as Mazda Motor and Mitsubishi Motors have begun to raise prices for certain models.
According to Tomoyuki Suzuki of American consultancy Alix Partners, the cost of car materials has roughly doubled from the 2020 average as of May. Steel is thought to account for about half of that value, and a new deal between Toyota and Nippon Steel could make the automaker consider raising the price of its vehicles again, according to the Nikkei.