Toyota Motor will increase the prices of steel materials it purchases from its strategic suppliers in the second half of fiscal 2021 by about 20,000 yen ($ 182) per tonne, the largest jump in contractual prices in Japan for more than decade, Nikkei reports.
The move marks Toyota's first purchase price increase in two years.
According to Nikkei, negotiations between Toyota and steelmaker Nippon Steel culminated in significant price increases. The two companies negotiate semi-annually based on quotations for iron ore and coking coal, the main raw material for steel production.
Passenger cars generally contain approximately 0.7 tonnes of conventional steel. Therefore, if the price per ton of metal products rises by 20,000 yen, the value of the car will increase by at least 15,000 yen per car.
Raw material prices, an important indicator in the negotiations between Nippon Steel and Toyota, are skyrocketing. The average price of iron ore purchased by Japanese steel companies from April to September 2021 was more than $ 160 per tonne, up 50% from October 2020 to March 2021.
Hot rolled coil, used in a wide variety of applications in the East Asian markets, will remain at just under $ 1,000 /t, double the level of the same period last year. In the US, steel prices exceeded $ 2,000 for the first time in history.
Toyota has decided that it will have to agree to some price increases to ensure a stable supply of steel materials. In the future, the focus will be on whether companies can cover these high raw material costs by reducing other costs or pass them on through higher product prices.