Nippon Steel raises steel prices for Toyota

Toyota Motor will increase the price of automotive steel it sells to parts makers by about 40,000 yen ($289) a ton in the second half of the fiscal year in October-March after the latest round of talks with Nippon Steel, a Japanese media outlet. says in the report.

Nikkei notes that Toyota is Japan's largest buyer of steel and is responsible for sourcing the metal for use both internally and by its suppliers. Its purchase price serves as a benchmark for contracts in industries ranging from shipbuilding to home appliances, and the recent price increases could be felt across many of Japan's business sectors.

The report says that since fiscal 2010, Toyota and Nippon Steel have been reviewing prices every six months based on the changing cost of iron ore, coking coal and other raw materials. The two companies agreed to increase for the third time in a row in their latest talks.

The Nikkei said the 40,000 yen increase is believed to be about a 20% to 30% jump. Previously, the largest increase under this structure was about 20,000 yen per ton for the April-September half of this fiscal year.

The move came as the war in Ukraine accelerated commodity prices. Coking coal broke records in the April-June quarter, up 30% from January-March. Iron ore was also at a high level.

Palladium, used in catalytic converters, rose more than 10% in late August from a recent low in July. Toyota expects material costs to increase by 1.7 trillion yen in the fiscal year ending March 31, 2023.

Toyota responded by raising prices in some markets such as the US. But in Japan, they have stagnated even as rivals like Mazda Motor and Mitsubishi Motors have begun to raise prices on certain models.

However, according to Tomoyuki Suzuki of American consultancy Alix Partners, the cost of a vehicle's material has roughly doubled from the 2020 average as of May. Steel is believed to account for about half of that value, and a new deal between Toyota and Nippon Steel could make the automaker consider raising the price of its vehicles, according to the Nikkei.