The Hindu Business Line : Re offsets gains from declining steel prices for car makers

New Delhi/ Bangalore Sept. 22 The falling steel prices in the global market, at a time when the rupee is depreciating, may not spell good news for the domestic automobile companies and consumers.

Car makers, who import 50-60 per cent of their steel requirements from overseas markets such as Japan, Thailand and South Korea cite that the devaluation of the rupee would offset any gains that they may accrue due to the lower steel prices in the global market.

“Even though the prices have fallen in the global market, we don’t expect to get any advantage as our imports would become more expensive with the rupee devaluating,” said Mr Shekhar Viswanathan, Senior Vice-President, Toyota Kirloskar Motors.

Steel sourcing

Auto companies say that while domestic steel can meet the requirements for inner parts, for body panels — the outer panel that constitutes the shape of the body is generally met from imported steel.

In case of Maruti Suzuki, 50 per cent of its steel is sourced from the domestic market and the demand for the remaining 50 per cent is met through imports.

Honda Siel Cars and Hyundai also source in similar proportion from overseas markets. Globally, steel prices have plunged 20-25 per cent in the last few weeks.

Japanese car maker Honda also said that with contracts being long term, it does not see any immediate benefit that could be passed on to the consumer.

Import costs

“With our imports coming from Japan and Thailand and the rupee depreciating since April, we continue to be affected.

“So when the steel prices had increased, we had absorbed the cost to an extent. Now we would not be able to bring the prices down,” said a Honda Siel Cars spokesperson.

Auto steel shortage

Shortage of domestic auto grade steel, combined with the need to make fuel-efficient car, has led more Indian and global auto makers import a majority of their steel requirements.

“The demand for such high tensile steel will only increase in the future as it helps to reduce the weight of the car, making it compliant to the stringent emission norms,” said Mr S. Maitra, Executive Director, and Managing Executive Officer, Supply Chain, Maruti Suzuki.