Toyota Joins 'Big Three' in Chip Downtime, But Rebound Coming?

“Toyota is currently experiencing a supply shortage that is affecting production at our plants in Canada, Kentucky, Alabama and West Virginia,” a Toyota spokeswoman said.

“While the situation remains fluid and complex, our manufacturing and supply chain teams are working diligently to develop countermeasures to minimize future impact on production and resume normal operations as quickly as possible,” she said.

Toyota, one of the largest automakers in the world, is not alone in its struggle to secure chips and other inputs. The “Big Three” Detroit-area automakers – General Motors, Ford and Stellantis – all have downtime underway or scheduled at their North American plants for the same reason. And in some instances, the idlings stretch into the third quarter.

The companies have in general declined to say how the chip issue might have impacted their steel purchases.

“I haven’t heard anything about major changes regarding our purchase of steel, but it would coincide with any increases or decreases we have in overall production,” the Toyota spokeswoman said.

Lower automotive demand for finished steel goods has already resulted in increased spot market availability, some market participants.

“We are starting to see a little availability on the spot market – and that is because of the semiconductor shortage,” one manufacturer source said. “Some of the contract customers are backing off.”

But others noted that mills are probably making more money on sales into the current record-high spot market than they would on sales to autmotive companies, which typically purchase on contract terms. And automotive demand could rebound sharply in the second half of the year should automakers secure enough chips to resume normal output amid continued strong demand for passenger vehicles.

“The auto companies are reaching out to stampers and telling them to gear up for a strong second half,” one Midwest service center source said. “And talking to the commercial guys at the mills, they are not expecting any slowdown whatsoever with auto because inventories are still so low.”

Steel prices in the meantime show no near-term signs of slowing down. Steel Market Update’s benchmark hot-rolled coil price stands at $1,540 per ton ($77/cwt), up 14.9% from $1,340 per ton a month ago and up 56.3% from $985 per ton at the beginning of the year.

And recent offers are in the ballpark of $1,600 per ton, sources said.

By Michael Cowden, Michael@SteelMarketUpdate.com