Japan Disaster Shakes Global Raw Materials Trade

NEW YORK (TheStreet) -- With the damage -- and the death toll -- in Japan still far from clear, manufacturing plants and nuclear reactors taken offline by the catastrophe will shake worldwide demand and pricing for raw materials, observers of the global commodities trades say.

Already investors have driven up shares of Posco ( PKX), for example. The South Korean steel giant saw its stock rise nearly 5% in New York trading Monday, the second session after news of the disaster broke on Friday morning in the U.S.

Posco is seen as the likely beneficiary of increased demand for steel as its Japanese competitors are forced to contend with mills damaged by the quake. As much as 20% of Japan's steel industry has been affected in some way by the disaster, according to an analyst at Hyundai Securities who spoke with Reuters.

Even if the massive quake didn't directly damage some steel mills, the rolling brown-outs and diminished power generation in Japan could reduce production at the nation's otherwise unscathed plants.

"A near-term drop in demand for industrial metals and raw materials will likely follow as ports and factories remain closed," wrote Anthony Rizutto, the metals-and-mining analyst at the New York investment firm Dahlman Rose in his daily note to clients Monday.

Over the longer term, however, analysts expect Japan's massive reconstruction effort to eventually boost demand for steel.

Japan has the world's second-largest steel industry, albeit a distant No. 2 behind China. Last year, Japanese mills produced nearly 110 million metric tons of steel. China produced about 630 million.

Among global steel names, shares of ArcelorMittal ( MT) were relatively flat at $34.66, while U.S. players were in the red. Nucor ( NUE) shares were slipping 1% to $46.63 and U.S. Steel ( X) 0.8% to $54.68.

As for the ingredients used to make steel, the global trade in iron ore and coking coal will likely see a falloff in demand, though not a drastic one, said Jeffrey Landsberg, analyst and founder of Commodore Research, which tracks dry-bulk shipping and the iron ore market for industry clients as well as investors.

Meanwhile, 10 of Japan's 55 nuclear reactors were offline as of Sunday, Landsberg wrote in a report Monday. About 33% of the nation's electrical needs come from nukes. That means the country will need to boost production at other forms of power plants, including coal (20% to 25% of Japan's electrical generation) and natural gas. Imports of thermal coal by the island nation will likely see an increase. An earthquake in 2007, Landsberg noted, resulted in the country's largest nuclear plant being idled for nearly two years, which lifted thermal coal imports by about 15%.

As for liquefied natural gas, Japan was already the world's largest importer of the product. Specialist LNG shippers saw their stocks rise sharply Monday. Tsakos Energy ( TNP) was up nearly 6% to $9.93, while Golar LNG ( GLNG) was jumping 7.8% to $20.10, having earlier touched $20.53, a 52-week high.

-- Written by Scott Eden in New York

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