[160311.EN.SEA] Container Shipping The Most Affected By Quake

Port closures to cost Japan more than US$3.4b a day in lost seaborne trade

(TOKYO) Japanese ports handling as much as 7 per cent of the country's industrial output sustained major damage from last week's earthquake, disrupting global supply chains and causing billions of dollars in losses, industry officials said.

Japan has begun assessing the damage to port infrastructure, vital to receiving aid, commodities and goods for rebuilding areas devastated by the 8.9 magnitude quake and tsunami that are likely to have killed more than 10,000 people.

The box shipping industry was seen as the most affected by the disaster as the destroyed ports handled containerised cargo for Hitachi Ltd, Daikin Industries and dozens of other companies.

'The short-term impact on economic activity could be greater than after the Kobe earthquake,' said Jiyun Konomi, Tokyo-based analyst with Nomura Securities, referring to the 1995 disaster which killed 6,000 people.

'Following the Kobe earthquake . . . activity did not return to pre-earthquake levels within three months for freight transportation.'

Tokyo and all ports south of Japan's capital were operating normally after briefly shutting down operations following Friday's disaster, while the rest of the country's ports were being assessed for damage, a shipowner and port official said.

'Ports south of Tokyo are all operational, ports north of Tokyo are still under evaluation,' said a shipowner based in Tokyo.

The closure of the ports was expected to cost Japan more than US$3.4 billion in lost seaborne trade each day, according to shipping trade publication Lloyd's List Intelligence. Maritime trade in the world's No 3 economy totalled US$1.5 trillion last year.

The north-east coast ports of Hachinohe, Sendai, Ishinomaki and Onahama were so severely damaged by Friday's disaster that they were not expected to return to operation for months, if not years. The ports were medium-sized facilities that handled mostly containers, but also some fuel products and dry bulk goods.

'These ports will need a lot of time until they can be fully restored,' said Tetsuya Hasegawa, operation manager at Heisei Shipping Agencies in Tokyo.

Japan's ninth-largest container port, Kashima, and the smaller port of Hitachinaka sustained milder damage and both could be back in operation within weeks, he said.

The tsunami also destroyed dozens of vessels, including three of Kawasaki Kisen Kaisha's panamax ships.

The disaster was expected to delay oil shipments and cause major port congestion.

'Our channels indicate that crude currently en route to Japan will likely be discharged in India or elsewhere in Asia, with the refined products carried on to Japan once ports reopen,' said Michael Webber, analyst at Wells Fargo Securities.

Low-sulfur crude shipments from Indonesia and Sudan may rise as Japan imports oil to burn in power plants after shutting nuclear reactors following the quake.

Electricity producers turned to low-sulfur crudes to burn in generators as an alternative after Tokyo Electric Power Co shut the Kashiwazaki-Kariwa facility, the world's largest at 8,200 megawatts, for 21 months after a 2007 earthquake.

'The loss of the power plant had a massive impact on Japanese demand for heavy-sweet Duri and lighter direct-burning grades such as Minas and Nile Blend,' JBC Energy consultants said in their weekly Asian report.

The earthquake and tsunami last week may also lead to a 'prolonged' closure of nuclear reactors that will prompt more natural gas imports, according to analysts at Societe Generale.

'This tragedy could also lead to a setback for the world's nuclear renaissance (except perhaps in China), leaving gas as the fuel of 'no choice' in OECD countries, where voters might decide against the nuclear option,' Thierry Bros, a senior analyst at Paris-based Societe Generale, said in a note yesterday.

Japan is the biggest user of liquefied natural gas. The nations may bid against each other for cargoes of LNG to meet heating and power demand.

Grains shipments, however, were not yet affected following the quake.

'Of Japan's some dozen major ports where bulk carriers or tankers can dock, only two are damaged,' said Nobuyuki Chino, president of Unipac Grain. -- Reuters, Bloomberg.

Source : Business Times, 15.03.11.