AM/NS India settles contracts with major auto OEMs at 8-9% price hike

ArcelorMittal Nippon Steel India (AM/NS India) has settled contracts with major auto companies for the July-September period with an 8-9 per cent hike in prices, passing on a part of the runaway steel prices to the end-user.

“We have settled for the July-September quarter with most of the auto OEMs (original equipment manufacturers) and are also reverting to six-monthly contracts. So, we have also concluded contracts for H2FY22 (second half of financial year 2021-22),” said Ranjan Dhar, chief marketing officer, AM/NS India.

“The increase will be in two parts, approximately 8-9 per cent in each period. The first settlement period is for July-September and the second for H2,” Dhar added.

Other steel majors, too, are understood to be negotiating contracts. Sources indicated that JSW Steel is in discussion to close the contract, but for the September quarter, which would be finalised soon.

The status of Tata Steel’s contracts is not known. But Tata Steel, JSW Steel, and AM/NS India supply about 90 per cent of the steel requirements of auto companies.

Discussions for auto contracts are protracted. For instance, the June quarter contracts were closed by most companies towards the end of June with a 10-12 per cent escalation in prices.

Steel firms have been forced to raise rates as prices have been rising globally since restrictions were eased. Sample this, domestic flat steel prices nearly doubled to Rs 72,000 a tonne in June from Rs 38,000 a tonne a year ago, while long steel prices rose 1.4 times to Rs 57,900 a tonne. Contract prices for auto companies were, however, lower.

The second wave of Covid-19, however, weakened the domestic market and prices cooled during July-September. However, they began rising again from October, on the back of some recovery in demand and cost push. After the latest increase this month, flat steel prices are closer to levels seen in June and long steel is higher than that.

“We follow index-based pricing for auto. Overall, the steel price index was throwing up a rise of Rs 15,000-19,000 a tonne, but we have not let this cause an immediate impact on our auto clients, who are currently facing headwinds due to the chip shortage. We have normalised the increase over two periods for ease of auto companies,” said Dhar.

“AM/NS India firmly believes in a symbiotic relationship with all our customers as the relationship is not spot but very long term in nature,” he added.

Typically, auto contracts are settled for a period of six months. But the volatility in prices witnessed last year prompted companies to move to quarterly contracts. Now, AM/NS India is switching back to half-year contracts.

Steel accounts for about 8-9 per cent of the selling price of a car, according to steel industry sources. Flat steel is used in a car’s body, non-exposed car chassis and safety components; longs are used in engines, transmission and steering, and seating wire applications.

        Steel contracts for auto:

•  AM/NS India settles contracts with major auto OEMs for July-September quarter and H2FY22
•  Increase will be in two parts approximately 8 to 9 per cent in each period
•  JSW Steel to finalise contract for July to September quarter