Japan's Nuclear Crisis Threatens Global Supply Chain

March 31, 2011
Hapag-Lloyd halts services to ports in Yokohama and Tokyo.

A widening nuclear crisis that has already forced some shipping firms to avoid Japan's key ports and sea lanes, could upset the global supply chain and hamper the nation's recovery, analysts say.

German container shipping giant Hapag-Lloyd has halted services to the ports of Yokohama and Tokyo -- the two major facilities on Tokyo Bay -- over fears of radiation contaminating its vessels, crew or cargo.

Other shipping lines have not so far interrupted port calls in the Tokyo Bay region, but have established no-go zones around the Fukushima nuclear power plant crippled by the quake and tsunami that hit northeast Japan on March 11.

Radiation from the plant is a "clear and present danger" to shipping lanes and ports on Japan's northeast coast, said Rajiv Biswas, Asia Pacific chief economist at consultancy IHS Global Insight.

Workers have so far failed to contain radiation leaks from the plant, which have contaminated farm produce and drinking water and prompted several countries to ban food imports from the area.

Levels of radioactive iodine-131 in the sea off the plant hit 4,385 times the legal limit on Thursday, their highest reading so far, officials said, amid a struggle to deal with large amounts of radioactive water at the site.

Officials have said that tidal dispersion means there is no immediate health threat, and that the iodine degrades relatively quickly.

Aside from health issues, radiation-tainted ships and their cargo risk being rejected by receiving ports, leading to heavy economic losses.

Authorities at the Chinese port of Xiamen last week turned away a Japanese merchant vessel over radiation concerns. The ship had sailed past the coast of Fukushima prefecture at a distance of 67 nautical miles, industry sources said.

"If more shipping lines start to restrict their ships calling at the Tokyo Bay ports of Tokyo and Yokohama, this has very severe logistical implications for Japanese trade," Biswas told AFP.

Over one third of Japan's sea container shipments go in and out of the two ports, he said.

"Although shipments can be diverted to more southerly ports such as Kobe, it will create tremendous logistical problems for the southern ports of Japan to handle very large additional shipping volumes."

Shipping firms carry the bulk of global trade. Small high-value goods like electronic components can be carried by air, but large items such as autos and heavy machinery would suffer in such a situation, Biswas said.

Hapag-Lloyd is currently servicing the ports of Kobe and Nagoya and will continue to monitor developments at the Tokyo and Yokohama ports, said spokeswoman Eva Gjersvik.

She added that it was too early to quantify the costs of the disruption.

"We have drawn a circle of 100 kilometres around Fukushima as a possible contaminated area and blocked all our containers within this area for further movements," she said by email.

Hapag-Lloyd has independent surveyors carrying out radiation spot checks on its vessels serving other parts of Japan.

Danish shipping firm Maersk said it would continue calling at Japanese ports as long as it is considered safe, and its offices in Japan remain open, but it has imposed a 140-nautical mile no-go zone around Fukushima.

"We have made precautionary preparations including the availability of iodine tablets should it become necessary," said Maersk spokesman Michael Christian Storgaard.

APL, a subdidiary of Singapore's Neptune Orient Lines, has put in place a larger exclusion zone of 200 nautical miles. Hong Kong-based Orient Overseas Container Line said its vessels continue to service Tokyo, Yokohama and Nagoya, but it is "closely monitoring" radiation.

Neil Davidson, a senior ports advisor at UK-based shipping consultancy Drewry, said that cargo diversion would mean extra costs for importers, exporters and shipping companies.

"Supply chains would need to be re-organized, and longer lead times built into flows," Davidson told AFP.

"For ships, this impact would be less as the diversion to other ports might actually save sailing time. However, there is a question about the ability of other ports (or) terminals to handle more ships (or) cargo."

Japan is a major producer of cars, heavy machinery, auto parts and electronics goods and components.

But the country's imports of iron ore and steel for reconstruction efforts -- as well as oil, gas and coal for electricity -- would also be hit if shipping supply lines are disrupted, affecting economic recovery, Biswas noted.

"Bringing goods and food to Japan is more vital than ever in the light of the recent earthquake and devastating tsunami," Maersk's Stoorgaard.

Copyright Agence France-Presse, 2011

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