Chrysler Barters With Suppliers Over Steel

Chrysler is seeking to safeguard supplies of steel in the face of runaway demand from China by bartering scrap metal left over from car production with its own suppliers.

General Motors, the world's largest carmaker, will decide within the next two weeks whether to introduce a similar scheme.

Chrysler, the US arm of Germany's DaimlerChrysler, would normally sell its scrap at auction. But the booming industrial economy of China, which has been investing heavily in new steel mills, is sucking in scrap steel from around the world, creating shortages for US steel producers.

The company hopes that shipping its steel offcuts back to mills will help keep the mills going. In return, Chrysler and its auto-parts makers will be assured of uninterrupted supplies of steel.

Steel mills use large quantities of scrap in producing new steel but Chinese demand has led to a doubling of exports of scrap from the US, to 12m metric tons last year.

Chrysler's move reflects the pressure being put on carmakers and other large industrial users of steel to accept rises in the price of the metal, despite long-term contracts with steel producers.

Steel mills are also taking action to offset the rising price of scrap steel, which rose from $103 a metric ton in June to $244 a metric ton, and of other materials. LNM, the world's second biggest steel- maker, is trying to buy more mines to secure supplies.