Lower steel price to ease carmakers' cost pressure

Shanghai, September 4 (Gasgoo.com) The steel prices in China have declined for seven straight weeks, and this will help ease the pressure of raw material costs on automakers in the country, said xinhuanet.com today. However, most cars are selling at their lowest prices, so dealers don't think the declining steel prices will push prices of their cars down further.

Many Chinese steel makers cut the prices of their steel products after their big brother Baosteel, China's No. 1 steel mill, announced in late August its decision to slash most of its steel product prices by 300 yuan/ton to fuel demand. An industry survey shows that China's steel prices are heading for a seventh straight week of decline on weaker demand due to slowing economic growth. The iron ore prices have declined by 12.2% from the beginning of the year.

An engineer from Brilliance Auto said that the steel price decline is surely a good thing for China's automakers to reduce their huge material costs. After the steel prices began to rise in late 2007, all carmakers in China found it hard to bear the soaring cost pressure. And now the lower prices of the major material for car-making will give these companies a moment to heave a sigh of relief.

The steel price decline will not see its effect on the auto industry until October, because the current supply of steel to many carmakers has to follow the agreed prices in contracts that were signed earlier. Starting next month, most carmakers are likely to have talks with their steel suppliers over signing new deals for lower steel prices.

If the carmakers have less pressure from steel material costs, the possibility is slight for them to reduce the prices of their vehicles. Most car makers and dealers said that they have been selling their vehicles at bottom-line prices for many months. It's time for them to make more money as well as to take a breath of relief.