Rebuilding Japan will need metal, but months later

Rebuilding infrastructure and shoring up defenses against natural disasters will boost Japan's demand for industrial metals -- eventually.

But first, stagnant industrial activity and power blackouts that have disrupted industrial production and halted production at copper and aluminum smelters and refineries are likely to erode demand.

"The reconstruction effort will involve using a good range of different metals -- aluminum and steel in particular -- which will also likely help copper prices," said Christin Tuxen, an analyst at Danske. "That is likely to be a few months out, maybe a year or two ahead."

The earthquake and tsunami that followed has crippled roads, rail and ports across much of Japan's northeast.

Japan, the world's third-largest commodities consumer, does not produce many raw materials, but imports raw ores for conversion into refined metals. Its refined copper output was about 1.52 million tonnes last fiscal year, about 7 percent of global output.

Estimates of the economic impact are only now starting to emerge, but once reconstruction gets underway demand for metals, and prices, could surge.

"Once they get into the reconstruction phase it will be bullish because obviously they have to replace all the structures," said Lars Steffenson, managing director at Ebullio Capital Management, said.

"And they are going to be spending a lot more money on strengthening buildings and tsunami defenses."

Benchmark copper on the London Metal Exchange traded at $9,167 by 1515 GMT (11:15 a.m. EDT) from $9,190 a tonne at the close on Friday, when the industrial metal hit a three-month low of $8,992 a tonne after the earthquake struck.

To soothe market nerves, the Bank of Japan offered a combined 15 trillion yen ($183 billion) to the banking system.(Reuters)