Toyota holds steel prices for sale to vendors for Apr-Sept

The carmaker, headquartered near Nagoya in central Japan's Chubu region, never comments on sales of steel to its thousands of vendors and parts suppliers, nor on the price it pays for steel purchases on their behalf from its largest supplier, Nippon Steel.

However, industry daily the Tekko Shimbun quotes a Chubu region source as saying that last Friday Toyota had begun informing buyers under its purchasing scheme that it would be keeping its sales prices unchanged. "Toyota's current price is estimated to be Yen 121,500/tonne ($772/t) for hot-rolled coils, which is higher than the market price," the daily observed. Current prices for ordinary carbon steel coils are at least Yen 10,000/t lower, Mysteel Global calculates.

The decision marks a change for Toyota, given that between the first half of Fiscal 2021 and second half Fiscal 2022 (October-March 2023) the company had lifted prices by some Yen 80,000/t. It paused prices from the first half of Fiscal 2023 till first half Fiscal 2024, and then reduced them by a total of Yen 35,000/t for three consecutive halves from second half Fiscal 2024. Late last year for the present October-March half, Toyota had trimmed its prices by Yen 5,000/t.

News of Toyota's decision suggests that negotiations with Nippon Steel and other steelmakers for next half's steel suppliers have either been concluded already or soon will be, and for a price rollover or close to it. Nippon Steel and Toyota are respectively Japan's largest steel producer and the country's largest steel buyer.

Toyota purchases steel materials for use in its own plants and by its parts manufacturers in bulk from Nippon Steel and other mills to give it negotiating leverage, and traditionally, the agreement they reach regarding price – in trend if not in actual per-tonne increase or decrease – is generally followed by other mills in their own talks with users, and by other steel consumers such as electric appliance manufacturers.

However, the Tekko suggests that this tradition might be fading. "For thin sheets for fields such as appliances and building materials other than automobiles, price negotiations are conducted on a quarterly or semi-annual basis," it notes. "Among these, it seems that cases have begun to appear that a price increase has been settled of about Yen 10,000/t from April."

In a commentary last Sunday, Japan's leading business daily, the Nikkei, noted that due to the impact of US tariffs and soaring prices of input materials, Toyota's consolidated net profit for the current fiscal year ending this month is expected to decrease by a huge 25% from the previous fiscal year to Yen 3.57 trillion.

However, it suggested that Toyota had decided to hold its price to vendors because the price of the main raw material, iron ore – a central component in its steel pricing formula – was seen fluctuating only slightly next half compared with the October-March period. But the Nikkei made the comment just as hostilities erupted in the Middle East that have subsequently sent several commodity prices soaring and these for iron ore have also edged higher, Mysteel Global notes.

Meanwhile, auto industry sources say that Toyota's production at its domestic plants in April is expected to average just over 14,800 units/day, about 10% higher than the same month last year and the highest since the end of the COVID pandemic.

Written by Russ McCulloch, russ.mcculloch@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com