Exclusive: Toyota to cut steel price for suppliers

Mechanics fix Toyota vehicles inside a service centre in Taipei March 3, 2010.

TOKYO (Reuters) - Toyota Motor Corp (7203.T) has told its suppliers that it will lower the price of the steel products it sells them by as much as 9 percent from April 1, four sources with direct knowledge of the talks said on Tuesday.

The move comes before Toyota completes its own price negotiations with top steelmakers such as Nippon Steel Corp (5401.T) for the business year starting in April, marking an unprecedented step that the sources said could be aimed at limiting expected price hikes by steelmakers.

However, Toyota also told suppliers that depending on its negotiations with steelmakers, it may readjust its selling prices, the sources said.

Toyota, which buys steel on behalf of its suppliers to get a better deal and sets the benchmark for steel price negotiations at other Japanese automakers, normally tells its suppliers of its selling prices after agreeing prices with steelmakers.

Toyota said it will cut prices of hot-rolled steel by about 9 percent to 69,500 yen ($769.5) a tonne from 76,500 yen, the sources told Reuters on condition of anonymity because the talks are confidential. In turn, Toyota will pay an equal 7 yen/kg less for the components it buys back from suppliers, the sources said.

A Toyota spokesman said the company could not comment.

Japanese steelmakers are looking to transfer at least part of the Chinese demand-led rise in raw materials prices to end-users in the latest annual negotiations. But automakers are reluctant to pay more for steel in Japan, where demand is sluggish due to slow car sales.

By informing suppliers of its intention to cut prices, it may be trying to influence negotiations with steelmakers, the sources said.

Toyota wants to keep steel prices in check to boost its group's competitiveness, telling suppliers that rivals such as Hyundai Motor Co (005380.KS) and Volkswagen AG (VOWG_p.DE) were closing the cost and quality gap, one of the sources said.

Japan's JFE Holdings Inc (5411.T), the world's sixth-biggest steelmaker, said last week it had agreed to a price rise of 55 percent for the April-June supply of hard coking coal from Australian mining giant BHP Billiton Ltd (BHP.AX), but will seek an annual contract again when the deal expires in July.

(Writing by Chang-Ran Kim; Editing by Joseph Radford)