JAPAN AND COMMODITIES

ARE COMMODITIES HIT BY EARTHQUAKE IN JAPAN?

Agnes Chung-yan Tse

CommodityOnline, March 22, 2011

The earthquake and tsunami that struck Japan on March 11 has caused tremendous destruction to the country. Police confirmed at least 7197 people died but actual casualty will likely be revised higher. Currently 11 of the nuclear reactors totaling around 9.7 GW, or about 20% of capacity, and 11-12 GW of thermal power generation, have been closed down after explosions in nuclear plants. Radiation leak after nuclear plant explosion has terrified people living in the country and worldwide. Nuclear capacity shut currently will likely be lost for a prolonged period of time, if not forever and the government will need to replace this energy source by oil, gas and thermal coal in the long-term.

The nuclear crisis in Japan has sent an alarm to nuclear industry globally. Policymakers worldwide have been debating over the safety of nuclear generation. US president Barack Obama requested the Nuclear Regulatory Commission to examine nuclear plants to ensure they can withstand earthquakes and other disasters. The US' 104 nuclear reactors are providing roughly 20% of the country's electricity. In China, the government has suspended approval for new nuclear power stations. While currently acquiring only around 2% of electricity from nuclear power from the 13 reactors, China has aggressive plans to increase the number of reactors to 110 over the next few years. Nuclear power represents about 5.5% of the world total energy demand. If 10% of global nuclear power facilities had to be closed for safety reasons and governments shifted to other energy sources, it would lead to approximately an +1.5% increase in oil demand, a +2% increase in each of LNG and coal demand .

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