- 27 Mar 2023
- ICICIdirect Research
STEELMAKERS EYE HIGHER AUTO CONTRACT PRICES
News: Major steel companies such as Tata Steel, JSW Steel and ArcelorMittal Nippon Steel India (AM/NS India) have initiated discussions with auto original equipment manufacturers (OEMs) for the April-June contract in the backdrop of firming up of steel prices. The negotiation comes on the heels of announcements on price hikes by vehicle manufacturers. Steel prices have moved up globally reflecting higher cost structure over December 2022. Typically, contracts for auto were for six months but volatility in steel prices led by supply disruptions in the aftermath of the Covid-19 pandemic prompted companies to move to quarterly contracts
Views: Tata Steel, JSW Steel and AM/NS India supply about 90% of the steel requirements of auto companies. Since December, spot steel prices have moved up globally in the US by about 49% and in Europe by 22% till March. The domestic market followed with a more than 12% hike, which would be the basis of negotiations for upcoming contracts. Steel prices have moved up globally reflecting higher cost structure over December 2022. Hence, going forward, directionally, there is likely to be an increase in auto contract prices
Impact: Positive