Nippon Steel Cuts Prices by 10 Percent for Toyota

Nippon Steel Corp, the world’s second largest steel manufacturer, has finally come to terms with Toyota Motor Corp to cut the autosheet by 10 percent which is less than an expected price cut. It has also been reported that the steelmaker would cut the price further towards the end of the current fiscal year. Demands of Toyota cars fell significantly in the world market due to global economic recession as well as surging Japanese Yen against foreign currencies. In fact, Toyota experienced 450 billion yen of operating in the fiscal year ending on March 31, 2009. The Japanese automaker is also expected a second straight operating loss in the current fiscal year too.

Because of economic slowdown, demands for cars, electronics and industrial products has been drastically reduced over the last one year, and thus, resulting into Steel prices in Asia being decreased by more than 50 percent to $500 per tonne. Naturally, the recent cut in steel price would definitely help the car makers like Toyota to cope up with the current economic recession and survive the poor sales in global market.

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Reuters

Toyota Motor Corporation and Mitsubishi Heavy Industries Ltd agreed to pay higher price for steel

Toyota Motor Corporation (TYO:7203) and Mitsubishi Heavy Industries Ltd. (TYO:7011) have agreed buy steel from Nippon Steel Corporation (TYO:5401) at higher price. Because of soaring cost of raw materials, Nippon Steel Corporation had to increase its product prices. Under the new agreement, Toyota is going to pay 25,000 yen to 30,000 yen for one metric ton of steel and Mitsubishi will pay 30,000 yen. Last month, Nippon Steel said that higher raw material costs would decrease the annual profit margin by 41%. For better profit prices had to be increased. In the last fiscal year ending on March 31, average product prices were 80,200 yen a ton. Bloomberg reports:

“This shows that steelmakers can pass on materials costs to customers,'' Toshiyuki Johno, an analyst at Nikko Citigroup Ltd. in Tokyo, said in a report today. He raised his target price for the shares to 900 yen from 800 yen and rates them ``buy.”

Nippon Steel gained 5 percent to close at 689 yen on the Tokyo Stock Exchange. The shares have climbed 18 percent in the past four trading days, the biggest four-day rally since September 2005.

Toyota has said it plans to raise prices by as much as 2.1 percent in North America this month to help offset rising materials costs.

This new agreement will also influence other Japanese steel makers and their customers. Another Japanese steel maker JFE Steel Corporation will also increase their prices. The latest steel price hike will eventually increase the price more than 100,000 yen per ton for the first time in last 26 years in Japan.

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