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.

The regions subject to power blackouts by Tokyo Electric Power (TEPCO), which lost about 20% of its operating thermal and nuclear power generation in the March 11 disaster, produce an estimated 500,000 to 550,000 tons of rolled aluminum products a year, an official of the Japan Aluminum Association said.

That is barely one-fourth of the nationwide total of about 2 million tons, he added.

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 Corp and Showa Denko K.K.
"The blackouts have forced us to cut back production levels slightly, but there has been no major impact so far," said an official at one of the companies affected by the power outages.

"Currently, we are expecting a slight dip in production for next month as automakers have shut their factories."

Toyota Motor 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 and Honda Motor, the total could reach 200,000 vehicles, the Nikkei newspaper said.

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

Power Supply
The impact of unstable electricity supplies could be limited, however, as facilities subject to blackouts may not have been running at full capacity at the time of the quake, industry officials said.

Facilities in west Japan remain operational and supported by economic activities unaffected by the quake, while Japan's fragmented electric power network will shield utilities in that region, as it makes it impossible for them to share a significant amount of power with eastern Japan.

While near-term demand for aluminum is expected to be slack, with many manufacturers suspending operations, suppliers have stuck to their shipment plans and are flexible about volume adjustments,
traders said.

"Automakers have halted production but there is demand in western Japan and for exports," said an official at a trading firm. "We have no plan to cut supply volumes or skip shipments."

There are concerns about transportation infrastructure, which could affect deliveries even if production lines are unaffected, industry officials said.

"Priority in sending materials to the quake-damaged areas, rising fuel costs due to demand in these areas, and a delay in reconstruction of traffic networks around northern Japan could affect deliveries of products longer-term," an end-user said.

Shipments of primary aluminum are largely unaffected, as major ports south of Tokyo have remained fully operational. About 100,000 tons of Russian aluminum per year is shipped to Hitachinaka port in Ibaraki Prefecture, which was damaged by the quake, but that is only a small portion of Japan's 2 million tons of annual imports, the industry group official said.