[miningmx.com] — KEY Japanese steelmakers stopped production at some plants on Monday as the country imposed power cuts to cope with the devastation brought by a massive earthquake and tsunami, although analysts said overcapacity elsewhere may curb any impact on steel prices.
JFE Steel Corp , the world’s No.5 steelmaker, on Monday halted production at a plant near Tokyo and global fourth-ranked Nippon Steel suspended operations at two small plants.
Sumitomo Metal Industries Ltd , Japan’s No. 3 steelmaker, said production at its main Kashima plant in Ibaraki prefecture remains suspended.
While the plant shutdowns should cut output of the world’s second-largest steel producer, significant global overcapacity should be able to fill the gap, limiting the impact on steel prices, analysts say.
“We estimate 15 million tonnes to 18 million tonnes of annualised steel production capacity may be affected given the proximity of the steel mills to the earthquake,” Macquarie analysts said in a note.
“Given the large steel overcapacity globally, much of the reduction in Japanese steel output will be made up for elsewhere.”
Japan produced 109.6 million tonnes of crude steel in 2010, ranking second globally after China whose output was nearly six times bigger at 626.7 million tonnes, according to the World Steel Association.
CAUTIOUS START
JFE said shipments from its 10 million tonnes per year Higashi Nihon plant near Tokyo have virtually halted due to a power outage.
“Production lines have stopped as we need to cooperate with the government’s power cut plans,” a company spokesperson said.
JFE resumed operations on Sunday of two blast furnaces at its Higashi Nihon plant, one of its two mainstay plants, that were idled after Friday’s quake and tsunami.
JFE has total production capacity of about 32 million tonnes, and operates a bigger plant in western Japan with a capacity of more than 20 million tonnes a year.
At Sumitomo Metal’s main Kashima plant, a fire in a gas holder in the facility had been extinguished but a company spokesman said the company does not know yet when the plant will resume operations.
Sumitomo Metal has a total crude steel production capacity of 14 million tonnes a year and the Kashima plant produces 8.3 million tonnes.
At Nippon Steel, its main Kimitsu plant in Tokyo with a capacity of 10 million tonnes and three blast furnaces had resumed operations on Sunday.
Nippon Steel “has cautiously started production, closely watching the power situation,” a company spokesman said on Monday.
But the tsunami hit Nippon’s small Kamaishi plant which is not operating. It produces 60,000 tonnes a month of downstream steel products. The company also shut a small seamless steel plant in Tokyo on Monday due to power outage.
“There will be virtually no impact on Nippon Steel’s production plans as there are stocks, while other plants can substitute the production,” said Takashi Murata, analyst at Daiwa Capital Markets, on the effect of Kamaishi plant being shut.
