Posco, the biggest South Korean steel maker, said on Monday that it was in talks with Toyota Motor to supply steel to the world's top auto company, which is seeking to cut costs as it heads for its first-ever annual operating loss.
Posco, one of the biggest global steel makers by output, has steel supply contracts with all major Japanese car makers for their Japanese output except Toyota.
"We are in talks with Toyota on a similar deal," a Posco spokeswoman, Ko Min Jin, said.
Posco, which earns around 70 percent of its revenue in the domestic market, sells its products at a relatively low price compared to regional rivals and a weaker won currency is also helping it gain price edge in the overseas market.
"The deal is very likely as Posco is already selling steel for Toyota for production in Thailand," said Eom Jin Seok, a Kyobo Securities analyst.
"Any deal will be positive for Posco as it will add a stable customer base at a time when domestic demand for cold-rolled steel is sure to decline."
The move is also likely to help Toyota, the biggest single customer of the world's second and third largest steel firms, Nippon Steel and JFE, which trail ArcelorMittal, press for a cut in steel supply prices.
Toyota plans to halt output at its domestic plants for 11 days in February and March, while Hyundai Motor, the top South Korean top auto company, plans to cut domestic output by up to 30 percent in the first quarter as drivers put off big-ticket purchases, leaving dealers' lots full of unsold cars.
Shares in Posco were down 4.2 percent to 378,000 won in late morning trade, lagging a 1.7 percent drop in the broader market.
