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Japanese earthquake
Commodity and stock implications
Event
A massive 8.9/9.0 magnitude earthquake hit the Pacific Ocean nearby
Northeastern Japan on 11 March 2011. The event caused widespread
damage with blackouts, fires and human lives were lost. While it is early days
to assess the full extent of the damage we have attempted to identify areas
that are likely to be impacted and the equities strategy in relation to this.
Short-term winners – downstream oil refining, coal and power related
assets.
Key stocks – Oil related - PPT Aromatics, Thai Oil, Esso Thailand, S-Oil,
GS Holdings, SK Innovations, Reliance, Inplex and CNOOC, Coal related
- Harum, Straits Asia and PTBA
Medium-term winners – coal and power related assets, steel manufacturers
and other construction related companies.
Key stocks - Coal related - Harum, Straits Asia and PTBA, Steel related
– Hyundai Steel, Dongkuk Steel, China Steel and Maanshan.
Impact
Oil and Gas implications – The major implications of this event appear to be
in the downstream segment of the market. In the refining market, around
7.5% of total refining capacity in Asia may have been impacted and the extent
and duration of the shut-down is unknown at this stage. When it comes to the
LNG market and the Petrochemicals markets, it is unclear as to the extent of
damage but plants have been shut down as a temporary measure.
Power implications –Positive for Coal, LNG and Diesel. 12GW out of
Japan’s 49GW of nuclear capacity has been shut down, of which 1.5GW has
been damaged permanently. Whilst there has been oil and coal fired
generation capacity damaged, typically the restoration times are far quicker
than the 2-3 years for nuclear. We believe this could lead to roughly 30mt of
additional coal equivalent demand, of which this is likely to be split between
LNG, coal and oil. This also puts the future of Japan’s nuclear strategy (and
other including China’s) into question.
Construction Materials – The steel market will see some impacts on both a
short and medium-term basis. The implications on the production side are
pretty limited given most mills have not seen much serious damage. The real
implication is more on the demand side. Reconstruction is always a major
factor after these sorts of events. Countries that are likely to benefit include
Korea, Taiwan and indirectly China.
Raw material impact – If steel production in Japan slows for a short period
there is a chance that raw materials might see some downside risk. We don’t
think the impact will be too large and we also think any Japanese production
weakness will be absorbed by others in the region.
Outlook
We will monitor the current situation and make adjustments when further
information is available as to the extent of this tragic event.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Japanese earthquake
Commodity and stock implications
Event
A massive 8.9/9.0 magnitude earthquake hit the Pacific Ocean nearby
Northeastern Japan on 11 March 2011. The event caused widespread
damage with blackouts, fires and human lives were lost. While it is early days
to assess the full extent of the damage we have attempted to identify areas
that are likely to be impacted and the equities strategy in relation to this.
Short-term winners – downstream oil refining, coal and power related
assets.
Key stocks – Oil related - PPT Aromatics, Thai Oil, Esso Thailand, S-Oil,
GS Holdings, SK Innovations, Reliance, Inplex and CNOOC, Coal related
- Harum, Straits Asia and PTBA
Medium-term winners – coal and power related assets, steel manufacturers
and other construction related companies.
Key stocks - Coal related - Harum, Straits Asia and PTBA, Steel related
– Hyundai Steel, Dongkuk Steel, China Steel and Maanshan.
Impact
Oil and Gas implications – The major implications of this event appear to be
in the downstream segment of the market. In the refining market, around
7.5% of total refining capacity in Asia may have been impacted and the extent
and duration of the shut-down is unknown at this stage. When it comes to the
LNG market and the Petrochemicals markets, it is unclear as to the extent of
damage but plants have been shut down as a temporary measure.
Power implications –Positive for Coal, LNG and Diesel. 12GW out of
Japan’s 49GW of nuclear capacity has been shut down, of which 1.5GW has
been damaged permanently. Whilst there has been oil and coal fired
generation capacity damaged, typically the restoration times are far quicker
than the 2-3 years for nuclear. We believe this could lead to roughly 30mt of
additional coal equivalent demand, of which this is likely to be split between
LNG, coal and oil. This also puts the future of Japan’s nuclear strategy (and
other including China’s) into question.
Construction Materials – The steel market will see some impacts on both a
short and medium-term basis. The implications on the production side are
pretty limited given most mills have not seen much serious damage. The real
implication is more on the demand side. Reconstruction is always a major
factor after these sorts of events. Countries that are likely to benefit include
Korea, Taiwan and indirectly China.
Raw material impact – If steel production in Japan slows for a short period
there is a chance that raw materials might see some downside risk. We don’t
think the impact will be too large and we also think any Japanese production
weakness will be absorbed by others in the region.
Outlook
We will monitor the current situation and make adjustments when further
information is available as to the extent of this tragic event.
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