Steel prices set to top ¥100,000 a ton

THE ASAHI SHIMBUN

Average prices of steel products will likely top 100,000 yen a ton for the first time, leading to more expensive cars, electronic appliances and other products, sources said Wednesday.

Prospects for the higher prices increased as Toyota Motor Corp. agreed in principle to accept a rise of more than 25,000 yen a ton during negotiations with major steel manufacturers, they said.

In later talks, Toyota and the steelmakers will decide when to raise the prices.

The agreement between Toyota and the steelmakers, including industry leader Nippon Steel Corp., is expected to become the basis for negotiations involving other automakers, household electronics appliance manufacturers and shipbuilders.

The highest price for steel products was 99,000 yen in fiscal 1982, a record that has stood for 26 years.

Nippon Steel currently charges about 80,000 yen a ton.

The price of steel increased by several thousand yen in fiscal 2007. But prices of raw materials have sharply risen in recent months. In spring, for example, the price of iron ore rose by 65 percent, while coal prices have tripled.

For this fiscal year, procuring raw materials is expected to cost the entire steel industry more than 3 trillion yen extra compared with fiscal 2007.

Steelmakers have therefore proposed to car manufacturers, shipbuilders and other major clients a price increase of about 30,000 yen a ton for steel products.

Toyota rejected that demand. However, in light of the tightening supply-and-demand situation due to the brisk consumption of steel in China and other emerging economies, Toyota agreed to accept a rise of more than 25,000 yen to secure a stable supply of steel.

In spring, Toyota and Nissan Motor Co. announced they will raise prices of their vehicles in the North American market. Toyota also passed on part of the increased costs for raw materials to the price of a new model put on the Japanese market Monday.

On Wednesday, Nissan President Carlos Ghosn said price increases for the company's cars in Japan are inevitable.

Production of one car requires about one ton of steel products.(IHT/Asahi: May 16,2008)