Japanese earthquake - Japanese aluminum outlook clouded by power shortages

Reuters reported that Japan's aluminum industry may see only relatively modest production disruptions from power outages in eastern Japan after this month's devastating earthquake, since much of its capacity is in the undamaged west but demand could shrink from key customers in harder-hit sectors such as autos.

An official of the Japan Aluminum Association said that the regions subject to power blackouts by Tokyo Electric Power Company which lost about 20% of its operating thermal and nuclear power generation in the March 11 disaster produce an estimated 500,000 tonnes to 550,000 tonnes of rolled aluminum products a year. That is barely one fourth of the nationwide total of about 2 million tonnes.

The Tokyo area utility is conducting rolling blackouts and is unlikely to get enough power back online to meet its usual levels of peak demand in the summer. Companies with aluminum facilities in the affected area include Kobe Steel, Furukawa Sky Aluminum Corporation and Showa Denko KK.

An official at one of the companies affected by the power outages said that the blackouts have forced us to cut back production levels slightly but there has been no major impact so far. Currently, we are expecting a slight dip in production for next month as automakers have shut their factories.

Toyota Motor Corporation has suspended production at all of its domestic assembly plants at least through March 26 for an estimated production loss of 140,000 vehicles. Adding in Japan's other top three vehicle makers, Nissan Motor Company and Honda Motor Company the total could reach 200,000 vehicles.

Unlike steel or copper few mainstay aluminum facilities are located in the quake hit region although the lack of a consistent power supply poses a risk to production.

The Japan Aluminum Association official said that the rolling blackouts have a much greater impact than the quake itself and member companies are concerned about the potential damage to their production. An intermittent blackout is a problem as it stops the entire aluminum production line for the whole day, disrupting the production process.

(Sourced from Reuters)