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Japan steelmakers resume ops, iron ore supply seen tight

Japan steelmakers resume ops, iron ore supply seen tight
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First Published: Tue, Mar 22 2011. 05 40 PM IST
Updated: Tue, Mar 22 2011. 05 40 PM IST
Tokyo/Perth: Japan’s top two steelmakers resumed normal production as the disaster-hit country begins a long way back to recovery that could stretch already tight global supplies of key steelmaking material, iron ore.
The massive 11 March earthquake and tsunami had disrupted steel output in Japan, the world’s second-largest producer after China, raising concern its iron ore demand may weaken in the near term before a reconstruction-led rebound.
“The impact of the Japanese earthquake and tsunami have been many and diverse and they affect us,” Sam Walsh, head for iron ore at No. 2 producer Rio Tinto , told an industry conference in Perth on Tuesday.
“There is a large reconstruction ahead, the magnitude of which is only just being realised.”
With a recovery and reconstruction bill that has been estimated at as much as $235 billion, Japan could be looking at years of rebuilding which analysts say could limit its steel exports, opening a void that could be filled by China and South Korea.
Japan continues to struggle with erratic power supplies and public concerns about radiation from a crippled nuclear power complex in Fukushima.
The Asian Nation exported a record 43 million tonnes of steel in 2010, according to the Japan Iron and Steel Federation, overtaking China as Asia’s biggest steel exporter.
South Korea’s POSCO, the world’s third-largest steelmaker, said on Tuesday it had received supply requests from domestic and overseas clients following the disaster in Japan.
Getting back on their feet
Japanese steel producers are also quickly getting back on their feet after the ferocious earthquake and tsunami that had left at least 21,000 people dead or missing.
Nippon Steel Corp, the world’s fourth-largest steelmaker, said output at three blast furnaces at its main plant in eastern Japan have recovered to pre-earthquake levels.
Nippon Steel resumed operations at two blast furnaces near Tokyo on Sunday and the remaining one later, after the company suspended operations for checks.
JFE Steel Corp, the world’s No. 5 producer, also said two blast furnaces at its 10-million-tonne-a-year plant near Tokyo are now operating normally. The company has resumed production at the plant while carefully watching the power situation, a company spokesman said.
But Japanese steelmakers may be months away from being able to raise prices amid uncertain market conditions following the disaster, while its regional rivals take advantage of a pickup in demand.
Tokyo Steel Manufacturing Co, Japan’s biggest construction steel maker, said it would leave its product prices for April shipments unchanged from March 2011.
Outside of Japan, South Korea’s Hyundai Steel said it needs to hike major steel product prices no later than early April due to a rise in raw material costs in the second quarter.
Rio Tinto’s Walsh said Japan’s disaster could set back some of its expansion plans if access to mining equipment, such as heavy machinery and truck tyres, became difficult.
Fortescue Metals Group, another major Australian iron ore producer, however, said its expansion plans were on track as it buys very little mining equipment from Japan.
Until recently, Japan was the largest buyer of Australian ore, but has been supplanted by China.
Walsh painted a bright future for iron ore producers, saying the outlook warranted spending billions of dollars to expand mines in Australia and build new ones in Africa and India.
But supply being controlled by a few big producers means iron ore prices will remain high this year, according to an industry group official in China, the top buyer of iron ore.
“Iron prices will stay high and fluctuate this year as the raw material is becoming more financialised and still in monopoly, ” Liu Yinan, vice chairman of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, told a separate industry conference in Qingdao.
China has complained that big iron ore miners are trying to force spot pricing on their Chinese customers after Rio, Vale and BHP Billiton ditched a decades-old annual pricing system in favour of a more flexible quarterly scheme in 2010.
Spot iron ore prices have gained more than 40% last year and reached record highs in mid-February 2011 on booming demand from China.
But prices have skidded 15% since touching all-time peaks as slow Chinese steel demand curbed buying, under pressure from Beijing’s attempts to cool growth by tightening monetary policy and restricting credit.
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First Published: Tue, Mar 22 2011. 05 40 PM IST
More Topics: Nippon | JFE | Steel | Japan | Earthquake |