Toyota Will Buy Posco’s Steel for Japanese Factories

Jan. 12 (Bloomberg) -- Toyota Motor Corp. will buy steel from South Korea’s Posco for its Japanese factories, seeking to reduce costs as Asia’s biggest automaker faces the first annual operating loss in 71 years.
The Japanese carmaker will use the steel from February to make some of its models, said Hideaki Matsubara, a Tokyo-based spokesman for Toyota. This is the first time Posco’s steel would be used in making Toyota’s cars in Japan, he said.
The accord with Posco, benefiting from a cheaper won, may pressure Japanese steelmakers in price talks with Toyota as the global recession intensified competition. Toyota is seeking to lower steel purchasing costs after falling sales forced it to close domestic factories for 11 days and cut temporary staff.
“Given that the auto industry is sputtering and there are concerns over its loss, Toyota wants to cut costs through cheaper purchases from Posco,” Cho In Je, a steel analyst with KB Investment & Securities Co., said in Seoul. “The carmaker may use it to pressure Japanese steelmakers to cut prices.”
Posco dropped 3 percent to close at 383,000 won in Seoul. The Asahi newspaper said yesterday that Toyota will buy steel from South Korea’s Posco for its domestic plants for the first time. Japan’s stock market is closed today for a holiday.
“We’ll supply steel to Toyota’s plants in Japan,” Choi Do Jin, a spokesman for the Pohang, South Korea-based steelmaker, said, without giving details.
Cheaper Won
Posco’s products are gaining a competitive edge against Japanese rivals because of the cheaper won. The Korean won lost 26 percent against the U.S. dollar last year, the worst performance among Asia’s 10 most-traded currencies.
Toyota has bought steel from Posco for its factories in Thailand and Indonesia since 2003, spokesman Matsubara said. The Korean steelmaker sells to other Japanese carmakers including Nissan Motor Co. and Mitsubishi Motors Corp. and competes with Nippon Steel Corp. and JFE Holdings Inc.
“The deal looks positive for Posco given that it could secure one more end-user at this difficult time and it’s not just anyone but Toyota, which has been quite reluctant to buy steel from foreign makers,” said KB’s Cho.
Global steel demand from carmakers and builders has dropped with a slowdown in the U.S., Europe and Japan. Posco cut output for the first time in its 40-year history. Nippon Steel, the world’s second-largest maker, may double its planned production cuts, four industry executives said Jan. 9.