March 25, 2011 / 2:53 AM / 7 years ago

Japan rebuilding to drive materials demand

NEW YORK (Reuters) - The catastrophic earthquake that rocked Japan will drive up sales of key materials the country needs to rebuild from the estimated $300 billion in damage, company executives told the Reuters Global Mining and Steel Summit on Thursday.

<p>A man cleans an area destroyed by the earthquake and tsunami near Yamada town, Iwate Prefecture in northern Japan, March 24, 2011. REUTERS/Carlos Barria</p>

The disaster -- Japan’s worst-ever quake and the ensuing tsunami -- has so far killed 9,523, forced more than a quarter of a million people from their homes and set off a crisis at a nuclear power plant.

This is certainly not the first earthquake to stun Japan, and companies expect the country to quickly turn to the business of reconstruction, like it did after the 1995 quake that struck Kobe.

“Japan is going to rebuild. They did after Kobe and I would expect them to do the same now,” said Laurie Brlas, chief financial officer at iron ore producer Cliffs Natural Resources

(CLF.N).

That company ships 25 pct of its Australian iron ore output to steel mills in Japan. Its Australian production totaled about 9 million tones and will grow to 11 million under a planned expansion.

In Seoul, top South Korean steelmaker POSCO (005490.KS) told the Reuters Summit it had lifted its sales volume target by 1 million tones and will raise output to meet orders from Japan.

“We are aiming to meet the requests (from Japan) by raising output, although we cannot meet all,” said Hwang Eun-Yeon, executive vice-president of POSCO.

POSCO now aims to sell more than 35 million tones of steel products this year from its previous target of 34 million tones.

South Korea’s top steelmaker expects to receive a minimum of 1.5 million tones of steel requests from Japanese clients this year following the quake, Hwang said.

Japan’s Nippon Steel (5401.T), JFE Steel (5411.T) and Sumitomo Metal Industries 5405.T said on Tuesday that their furnaces were resuming operations after being hit by the March 11 earthquake and tsunami.

Shares of Korean steelmakers, including POSCO, whose leading shareholders include Berkshire Hathaway Inc (BRKa.N), rallied after the quake, on expectations they would benefit from reduced shipments from Japan.

Trading volumes in the nascent iron ore futures contracts at the Indian Commodity Exchange (ICEX) will show “robust growth” its chief executive said, as hedgers that supply Japan drive up volumes by 20 percent this year and next.

“Rebuilding of Japan will stimulate the iron ore trade once again, which is sure to get reflected on our platform in terms of higher volume and increasing participation,” Rajnikant Patel, ICEX managing director and chief executive, told the Summit in Mumbai.

ICEX launched iron ore futures in January. However volumes and prices have been lackluster as foreign firms cannot trade futures on the exchange. However, Patel predicted volume growth of 20 percent in the year starting April 1, as new contracts such as low-grade iron ore are offered.

Still, immediate shipments of some products may decline before Japan’s reconstruction effort takes off.

Some nickel ore shipments to Japanese buyers from Indonesian state miner Aneka Tambang Tbk (ANTM.JK) may be delayed, the firm’s chief Alwin Syah Loebis told the summit in Jakarta. Nickel is a key ingredient in stainless steel.

“Some five to six cargoes of nickel ore may be delayed in the next few months because one of our buyers has been affected by the earthquake,” he said.

“But this is only temporary. Once Japan recovers, demand will pick up and help nickel prices to remain firm,” he said.

Cargoes that may be affected are destined for Pacific Metals Co. Ltd, while shipments to Antam’s two remaining buyers Sumitomo Metal Mining Co. Ltd (5713.T) and Nippon Yakin Kogyo Ltd (5480.T) were unaffected, he said.

Reporting by Siddesh Mayenkar in Mumbai, Janeman Latul and Fitri Wulandari in Jakarta, Julie Gordon, Euan Rocha and Pav Jordan in Toronto, and Steve James, Matt Daily and Carole Vaporean in New York, Writing by Matt Daily; editing by Rob Wilson

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