Tight steel supply impacts global automakers negatively

Tight steel supply impacts global automakers negatively

Japanese automaker Nissan's decision to suspend production due to steel shortage is attributed to China's huge economy, which consumes ever more basic materials. In 2003, China's steel consumption accounted for over 25% of the world's total steel consumption. Analysts believe that shortage may not be solved until 2006 when the world's largest coke plant is expected to begin operating in China. In July, Brazil's mining giant Companhia Vale do Rio Doce (CVRD), Chinese coal producer Yankuang Group and Japanese trading house Itochu Corp have signed an agreement to form a joint venture company in China. The joint venture company, which is scheduled to commence operations in 2006, will produce 2 million mts of coke per annum. Nissan yesterday announced that it will suspend assembly line output at three of its four Japanese plants in the coming days. This suspension will cause an output loss of 25'000 vehicles. Analysts believe that major automakers Honda and Toyota may also feel this distress sooner or later. Toyota and Honda are also running at full capacity in Japan. So, if Nissan has difficulty in having the adequate amounts of steel, they may also experience this situation as well. As reported by SteelOrbis today, Toyota announced that the company will procure more steel from South Korea and start to purchase steel from China in order to be prepared for the steel shortage.