Japan catastrophe could impact bulk shipping

Japan catastrophe could impact bulk shipping    London-based broker Freight Investor Services said Tuesday the unfolding catastrophe in Japan could have a significant effect on the dry bulk shipping market.
   “In the short term, shipping has been disrupted with 13 ports reported by Reuters to have closed, with some of these unlikely to be operational for several months or even years,' FIS said. 'Initial assessments by Macquarie and the Steel Index (a provider of information about the industry) put production at five large steel mills in the worst-affected region at risk, accounting for 15 million to 18 million tons of annualized steel production capacity.”
   That could remove around 20 million to 25 million tons of iron ore and 9 million to 10 million tons of coking coal demand, FIS said.
   But over the longer term “reconstruction should boost demand for steel with potential for significant increases in raw material imports. Whether the additional steel demand is met entirely by Japanese production or partially by China, Korea and/or Taiwan, the overall effect should be a boost to iron ore and coking coal imports into the region, FIS said.
   It added that in such an event Capesize vessel demand would be “the biggest beneficiary, with the Panamax sector boosted by extra coking coal demand alongside additional Handysize and Supramax employment on steel products, timber and grain trades. Should additional cargoes be required into China, this would entail more spot market chartering activity, in contrast to Japan's traditional reliance on longer term freight contracts.”
   FIS also noted that demand for steam coal could be boosted, drawing a comparison to the temporary shutdown in 2003 of 17 nuclear power stations in Japan for emergency safety inspections after it was revealed that inspection reports had been falsified.
   “The 2003 closures led to an increased reliance on both oil and coal-fired power generation. There was an unexpected spike in Japan's steam coal imports (including anthracite) in July and August 2003 to more than 15 million tons per month compared to an average of 14 million tons per month in the first half of 2003.
   FIS said a “chronic shortage of dry bulk tonnage at that time led to the record-breaking surge in freight rates.” Plants only gradually came on line and combined steam coal and anthracite imports jumped from 112 million tons in 2003 to 123.6 million tons in 2004.
   Finally the company noted the current disaster could “cause a rethink in Japan of the viability of nuclear generation,” which provides one-third of Japan’s electricity.