Nippon Steel Corp. and Toyota Motor Corp. have agreed to price rises of more than 10 percent for specialty steel used to make auto parts, the Nikkei business daily reported on Wednesday.
Japan's biggest steelmaker and its biggest automaker - whose agreements serve as the industry benchmark - are also likely to agree to a price rise of around 5 percent for steel sheet used to make car bodies, the paper said.
Steel companies and automakers as a policy do not comment on price negotiations.
Trade paper Japan Metal Bulletin also reported on Wednesday an automaker has agreed to pay 10 percent more or 10,000 yen ($82.18) more for specialty steel for products to be delivered from July.
The news boosted shares in specialty steelmakers but depressed the automakers' stocks on concerns of expected heavier materials costs.
By midday, Daido Steel Co rose 6.3 percent to 824 yen, Sanyo Special Steel Co. soared 11.4 percent to 901 yen and Mitsubishi Steel Manufacturing Co. gained 9.04 percent to 591 yen.
Nippon Steel was up 0.6 percent at 861 yen.
Toyota Motor Corp. fell 1.1 percent to 7,420 yen, while Nissan Motor Co dipped 0.2 percent to 1,312 yen.
Steelmakers have been negotiating with carmakers in the past two years to pass on soaring nickel, steel scrap and other raw materials costs.
Analysts had in general expected a price rise of about 5,000 yen per tonne for specialty steel.
"It's a bit of a surprise. If the price is raised by 10,000 yen as reported and the rise is implemented retroactive from April, it's good news for large steelmakers' first quarter earnings," said Takashi Aoki, vice president at the equity investment division at Fuji Investment Management.
Most analysts have said they will raise their earnings forecasts for Nippon Steel, JFE Holdings Inc. and other steelmakers for the year to March 2008, if automakers agree to price rises.