Automakers resisting steel firms’ surcharges

Shanghai, July 10 (Gasgoo.com) Automakers in China are negotiating about raw materials prices with steel companies but the two camps still haven’t reached an agreement, according to Shanghai Securities News. Meanwhile, some automakers in Europe, the U.S and Japan are beginning to resist price increases, saying they won't pay any surcharges outside agreed-upon supply contracts.

The Shanghai branch of Japan's largest steel company Nippon Steel Corporation has negotiated about the steel price for the second half of 2008 with domestic automakers but has failed to reach an agreement as their customers refuse to pay surcharges, Shanghai Securities News reporters cited an insider as saying so.
Industry insiders say the resistance is one of the first strong signals to steelmakers that their hardest-hit customers have reached a tipping point and may not be able to withstand higher prices.

Currently most steelmakers in the U.S., including Arcelormittal, U.S Steel Corp. and AK Steel Corp., are engaged in the latest round of negotiations with Ford Motor Co., General Motors Corp., Toyota Motor Corp. and others to set the price and terms of steel bought under a contract.

Although auto makers declined to comment on current talks, they have stated that steel and other raw-material costs are burdening the industry in one of its toughest times.

Undoubtedly, the high profitability of auto industry will be changed amid the rising prices of raw materials. “The auto industry is likely to enter a period of low-profit growth from previous high-profit growth in these two years (2008-2009),“ said Dong Jianhua, auto industry analyst of Southeast Securities Co.