Steel prices hikes will be lower than expected after Ispat Iscor and Naamsa reached an agreement. Although it remains to be seen how the hikes will affect vehicle prices (if at all), embattled automotive component makers will be hardest hit.

Steel prices hikes will be lower than expected after Ispat Iscor and Naamsa reached an agreement. Although it remains to be seen how the hikes will affect vehicle prices (if at all), embattled automotive component makers will be hardest hit.


In November, CARtoday.com quoted Naamsa director Nico Vermeulen as saying that local component (steel based) pricing and OEM production costs would rise steeply if Ispat Iscor hiked its prices by the anticipated levels on December 1.


At the time, it was thought Ispat Iscor Limited would hike its prices 25 per cent in respect of hot rolled product, 24 per cent for cold rolled product and 12 per cent for electro galvanised steel.


However, on Monday cited industry sources saying that the increases would now be in the order of 20 per cent for hotrolled and cold-rolled steel.


There are fears that the new proposed steel price hikes could prompt car price increases after a year in which stable car prices, together with lower interest rates, led to a sales boom.


Significant steel price hikes could also erode the competitiveness of vehicle exports, which are already under pressure due to the strength of the rand against the dollar.


Ispat Iscor and Naamsa confirmed at the weekend that an agreement had been reached on lower steel price hikes.


Automotive manufacturers have escaped major steel price hikes this year thanks to a special price arrangement they made with Ispat Iscor in January, the report said. Globally, steel prices have soared this year as a result of booming demand in China for steel and the materials used to make steel.


Unfortunately, the component manufacturing sector does not have a special arrangement with Ispat Iscor and the new increase will follow a 35 per cent cumulative increase on Ispat Iscor's hot-rolled steel prices and 28 per cent on cold-rolled steel.


National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Clive Williams said component makers have been forced to lower their prices in the face of heightened competition from imports. In addition to lowering import costs, the strong rand reduced exports.


"Component makers are treading water at double speed just to keep their noses above water," he said.


Meanwhile, Vermeulen was quoted as saying that it would be up to individual vehicle manufacturers to decide whether to absorb steel price hikes, or to pass them on to consumers.


He added that the steel price hikes would add to other cost pressures that have emerged in the car assembly industry this year.