Japan Steels to Offer Automotive Flat Steel Export Hike for 2H

Japanese integrated steel makers seek wide price hike for automotive flat steel export in second half of fiscal 2010 ending March 2011. Some steel makers already started the negotiation with major automakers offering price hike. The steel makers don’t disclose how wide the price hike is but the price is settled based on supply balance, raw materials cost and local market condition. Supply of high grade steel products including high tensile steel gets tighter in Asia when automobile output hit record level in various Asian countries while steel market price rebounds in China and Asian countries. However, automakers resist steel price hike after they accepted price hike in the first half year when automakers try to develop cheaper models for emerging countries under severe competition. The negotiation could take longer time to find their common ground.

Japanese steel makers will start domestic automotive flat steel price negotiation with automakers for second half of fiscal 2010 in November after the steel makers can estimate raw materials cost for the half year while the steel makers got near 20,000 yen per tonne of price hike for the first half year. The steel makers try to watch the raw materials situation eyeing additional price hike to cover potential higher raw materials cost than the first half.

Japanese automakers would seek steel price down for second half of fiscal 2010 when automobile sales could decrease after termination of subsidy for eco-friendly vehicle in September. The steel makers’ export price talk could impact on the domestic price negotiation with automakers.

Asian automobile output is strong when Chinese output increased by around 40% to 11 million units in January-August from same period of 2009. The production doubled to 1.06 million units in Thailand in the period and increased by 70% to more than 400,000 tonnes in Indonesia in January-July. Indian automobile output hit more than 10% growth for 14 months in a row through August. Japanese steel makers’ automotive flat steel export keeps historical high level to meet the growing demand but the supply gets short for some areas.

However, Japanese automobile output would decrease in and after October. Japanese automakers plan lower production in October-December compared with July-September. Higher yen rate could reduce the automakers’ export including knockdown sets.