HONDA says it will be monitoring rising steel prices and may have to increase the cost of new cars.

The Japanese car giant, which employs 4,000 people in South Marston making Civics and CR-Vs, last year made 193,000 cars in Wiltshire.

Anglo-Dutch steel firm Corus imposed a 20 per cent hike in the contract cost of steel this month.

Corus said it was feeling the pinch of higher prices for iron ore and coal, which have risen in the face of increased demand from the booming Chinese steel industry. It warned that it expected raw material prices to lift by a similar amount this year.

A Honda spokesman said the prices of its cars during the last few years had remained fairly static.

He said the group had no plans to increase its prices as a direct result of the Corus rises and was currently absorbing higher raw material costs.

However, he added: "Obviously, we will have to monitor how things are going during the next few months and price rises may be necessary in the future."

Nissan, which makes the Primera, Almera and Micra in Sunderland, also said new car prices had remained roughly the same for at least three years but said it was watching rivals' decisions.

A typical car may use more than 770 kilograms of steel in its frame, engine and tyres.