* Shutdown of nuclear plants to boost fuel oil demand
* All ports closed, discharge operations halted
* About 20% of Japan's total refining capacity shut
(Updates market prices, damage and death toll)
By Randy Fabi and Francis Kan
SINGAPORE, March 11 (Reuters) - Japan's earthquake forced
port closures and shutdowns of oil refineries and metal plants
in the world's third-biggest economy on Friday, rattling
commodity and energy markets as participants weighed up how
quickly activity could return to normal.
The magnitude 8.9 earthquake, the biggest to hit Japan in
140 years, struck the northeast coast, triggering a 10-metre
tsunami that cleared everything in its path from houses to cars
and set farm buildings on fire. At least 59 people have been
"This natural disaster could result in another sharp rise in
risk aversion on markets and a continuation of yesterday's
correction on commodity markets," Commerzbank said in a report.
"The demand for oil could be lower, at least temporarily,
because of the earthquake."
ICE Brent crude oil fell more than 2 percent to
around $113 a barrel, partly due to the earthquake.
Tokyo gold futures rallied about 0.4 percent soon
after the quake, but has since turned lower by around 0.7
percent at 3,473 yen per gram. Tokyo rubber fell 3.6
percent to 384.1 yen.
Metals firm Mitsui Mining said operations at its
Hachinohe zinc smelter, with a capacity of 112,000 tonnes a
year, were halted by the earthquake, and employees evacuated.
All Japanese ports have closed, with discharging operations
stopped, shippers said. Top refiner JX Nippon Oil & Energy Corp
halted operations at three plants, while fire
engulfed a storage tank at a unit of Cosmo Oil Co . The
two make up about 20 percent of the country's total refining
"It's a big mess. All discharge operations are suspended in
the area," said one shipbroker.
TV footage showed several ships damaged by the tsunami
including a large panamax vessel, which typically could carry up
to 80,000 tonnes of coal, iron ore or grain, a second
Tokyo-based shipbroker said.
A ship carrying 100 people was also swept away, the Kyodo
news agency reported.
"Most or all coal stocks will be washed out at many of the
coal-fired power plants," he said. "Ports will be closed at
least for a short period until damage assessments can take
Around 4.4 million homes were without power in northern
Japan, media said.
Hokuriku Electric Co said all three reactors at its
Onagawa nuclear plant in northern Japan shut down automatically.
Some 2,000 residents living near a nuclear plant in
Fukushima prefecture, north of Tokyo, were told to evacuate but
the government said no radiation was leaking. It said the
evacuation was a precaution after a reactor cooling malfunction.
Electric Power Development (J-Power) has also
halted operations of its Isogo thermal plant in Yokohama, Jiji
Mitsubishi Chemical halted operations at two
naphtha crackers at Kashima after a power outage. The units
produce 828,000 tonnes per year of ethylene, or around 11
percent of Japan's overall capacity.
Asian fuel oil's front-month timespreads climbed $1.00 a
tonne on Friday, after the earthquake forced nuclear plants to
shut down, possibly boosting fuel demand, traders said.
Japan is expected to seek more supplies of low-sulphur fuel
oil (LSFO) for power generation due to the shutdown of several
nuclear plants, traders said.
"I would expect that to happen and soon, and they would
probably have to pay up if the demand is for prompt-arrival
cargoes and in large volumes, as overall supply in Asia is quite
small and quite niche," a Singapore-based LSFO trader said.
Most of the region's supply of 100,000-150,000 tonnes a
month comes from Brazil's Petrobras, which produces the residual
fuel from its refineries. Supplies also come from traders such
as Vitol, Trafigura and Westport, who blend the cargoes, and
Indonesia's Pertamina, which exports about 2 million barrels of
low-sulphur waxy residue (LSWR) a month.
Petrobras said operations were normal at its 100,000 barrel
per day Nansei Sekiyu refinery.
Middle distillates also strengthened after the quake, with
gas oil's April/May timespread flipping into positive territory
on the prospect of supply disruptions out of Japan, traders
Base metals reacted negatively to the quake, with copper and
aluminium extending earlier losses.
London Metal Exchange copper dropped by around $200,
or more than 2 percent, after the quake, to touch a three-month
low of $9,045. Aluminium shed more than 2 percent.
Japan was expected to produce 1.6 million tonnes of refined
copper in 2011, about 7.6 percent of world output.
Most of Japan's eight copper refineries were probably far
enough away from the quake epicentre to escape serious damage.
But two, the 250,000-tonne-per-year Onahama plant and the
217,000 tonne Hitachi operation, both owned by Pan Pacific, were
close enough to the coast for analysts to describe them as at
Japan produces around 670,000 tonnes of zinc, or 5 percent
of world output.
(Additional reporting by Florence Tan, Yaw Yan Chong and Nick
Trevethan in Singapore; Writing by Manash Goswami and Randy
Fabi; Editing by Clarence Fernandez and Sambit Mohanty)
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