Thursday, May 29, 2008

Honda faces steel price hike in US

Honda Motor Co's  chief executive said on Thursday the Japanese automaker had been asked to pay more by a U.S. steelmaker despite a contract agreed earlier this year, and added he feared other suppliers may follow suit.

Global steel prices have soared on tight demand, with brisk orders for construction machinery, ships and energy-related products in Russia, the Middle East and other emerging markets.

Honda sets product prices with U.S. steelmakers at the start of every year, but one undisclosed supplier recently imposed higher prices, Takeo Fukui said.

"It came all of a sudden, ignoring the contract," he told reporters after a news conference to launch a new minivan in Tokyo.

"I'm hearing that so far it's one company, but it may spread to others. It's an abnormal situation," he said, adding that Honda was probably not the only buyer targeted.

This comes on the back of a rumoured 30% increase to car manufacturers imposed by Nippon Steel just last week. Traditionally the automotive manufacturers secure prices fixed for the whole year (and in recent year's they have demanded reductions in price year on year). These are however most unusual times and the rules are changing.

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