Sept. 20 (Bloomberg) -- Japan's Nikkei 225 Stock Average gained, paced by steelmakers and commodity-related stocks, on speculation their profit growth will be sustained by solid demand in emerging markets.

JFE Holdings Inc., Japan's second-biggest steelmaker, rose to the highest in more than a month. Sumitomo Metal Mining Co., the nation's No. 1 nickel producer, jumped.

``Steelmakers benefit from growth in emerging markets including China and India,'' said Kiyoshi Ishigane, who helps oversee $61 billion in assets at Mitsubishi UFJ Asset Management Co. in Tokyo. ``Commodity stocks are on a rising trend and Japanese-made steel is so much in demand globally.''

Limiting gains, consumer lender stocks declined on speculation expanding credit expenses will hurt their earnings. Mitsubishi UFJ Nicos Co. dropped the most since November 2003 after the Nikkei newspaper reported the company expects a loss for this year.

Chip-related shares such as Elpida Memory Inc. slid after Dramexchange said computer-memory prices will drop more next quarter after falling 10 percent in the second half of September because of oversupply. The shares also fell after ratings for Sumco Corp. and Tokyo Seimitsu Co. were downgraded by brokerages.

The Nikkei added 32.25, or 0.2 percent, to 16,413.79. The broader Topix index lost 0.74, or 0.1 percent, to 1,566.84 after rising as much as 0.7 percent.

`A Structural Change'

The Topix Iron & Steel Index advanced 2.8 percent, the best performer among the industry groups in the broad measure.

JFE climbed 300 yen, or 4 percent, to 7,770, the highest since Aug. 14. Nippon Steel Corp., Asia's largest maker of the metal, rose 11 yen, or 1.4 percent, to 805.

Crude steel production in Japan increased for a 15th month in August as makers of the alloy raised output to meet higher demand, the Japan Iron & Steel Federation said yesterday. Output gained 3.7 percent to 9.97 million metric tons compared with the same month a year earlier.

``Investors can be relatively confident about buying steelmaker and commodity-related stocks,'' said Yasuhiko Hirakawa, who helps manage $80 billion at DLIBJ As set Management Co. in Tokyo. ``Strong demand for their products is supported by growth in emerging nations, which is a structural change.''

Sumitomo Metal Mining advanced 80 yen, or 3.1 percent, to 2,635. Mitsui & Co., Japan's second-largest trading company which sells industrial fuel and metals, rose 65 yen, or 2.5 percent, to 2,640. Japan Petroleum Exploration Co., the nation's second-biggest oil explorer, added 180 yen, or 2.3 percent, to 8,140.

Crude oil for October delivery recently traded at $81.85 a barrel. Yesterday, the contract touched $82.51, the highest intraday price since trading began in 1983.

UFJ Nicos' Loss

Copper futures for December delivery jumped to as high as $3.605 a pound in New York, the highest since Aug. 2 and Nickel for delivery in three months, which surged 11 percent in London, climbed as much as 12.2 percent, the most since March 1988.

Mitsubishi UFJ Nicos plunged 37 yen, or 13 percent to 239, the biggest drop since Nov. 7, 2003, after the Nikkei newspaper reported the company expects a 100 billion yen ($836 million) loss for this year, citing costs to cut jobs and take other restructuring steps.

Other consumer lenders also declined. Aiful Corp., Japan's biggest consumer finance company by revenue, tumbled 219 yen, or 11 percent, to 1,732. Acom Co., the second largest, dropped 215 yen, or 7.8 percent, to 2,560. Promise Co., the nation's No.3, fell 125 yen, or 4.5 percent, to 2,655.

Still Bearish?

A measure of finance companies including consumer lenders dropped 4.3 percent, the worst performance among the 33 Topix industry groups.

Sumitomo Trust & Banking Co., Japan's fifth-largest bank by market value, fell 38 yen, or 4.5 percent, to 811. Mitsui Trust Holdings Inc. lost 7 yen, or 0.8 percent, to 853. Nomura Holdings Inc., the country's biggest securities company, declined 51 yen, or 2.7 percent, to 1,830.

``Trust banks were sold because a big portion of their loans are for consumer lenders,'' said DLIBJ's Hirakawa. ``Sentiment over financial stocks will also remain bearish because people anticipate brokerages and banks will post additional losses due to the recent credit crisis in the next quarter as well.''

Elpida, Japan's biggest maker of dynamic random access memory, or DRAM, dropped 240 yen, or 5.9 percent, to 3,810. Advantest Corp., the world's biggest maker of memory-chip testing equipment, declined 180 yen, or 4.7 percent, to 3,690. Tokyo Electron Ltd., the world's No. 2 supplier of chip-making equipment, lost 380 yen, or 4.9 percent, to 7,340.

Sumco, Astellas

Contract prices for DRAM will fall 10 percent to between $16 and $17 in the first half of this month, Joyce Yang, an analyst at Taipei-based Dramexchange, Asia's largest chip spot market, said by phone. DRAM contract prices are set twice a month.

Sumco Corp., the world's second-largest maker of silicon wafers, plunged by the exchange-imposed daily limit of 500 yen, or 10 percent, to 4,380 after Morgan Stanley cut its rating on the stock to ``underweight'' from ``equalweight,'' saying a likely drop in demand for 300 millimeter wafers will erode the company's profit for the business year to January 2009.

Tokyo Seimitsu Co., the world's biggest producer of grinders that make silicon wafers thinner, slumped 190 yen, or 7.6 percent, to 2,320. Merrill Lynch & Co. lowered its rating on the stock to ``sell'' from ``neutral,'' citing weak demand for chip-testing and production equipment.

Drug Clearance

Astellas Pharma Inc., Japan's No. 2 drugmaker, climbed 170 yen, or 3.2 percent, to 5,490 after it submitted data on an immunosuppressant to U.S. regulators, moving a step closer to sale of the medication in the world's biggest drug market.

TIS Inc., which provides computer system construction data processing services, tumbled 145 yen, or 7 percent, to 1,935, the largest slide since July 31, 2006, after UBS AG. cut its rating on the stock to ``neutral'' from ``buy.''

Nikkei futures expiring in December added 0.1 percent to 16,380 in Osaka and gained 0.2 percent to 16,380 in Singapore.

Acom Co. (8572 JT)
Advantest Corp. (6857 JT)
Aiful Corp. (8515 JT)
Elpida Memory Inc. (6665 JT)
Japan Petroleum Exploration Co. (1662 JT)
JFE Holdings Inc. (5411 JT)
Mitsubishi UFJ Nicos Co. (8583 JT)
Mitsui & Co. (8031 JT)
Mitsui Trust Holdings Inc. (8309 JT)
Nippon Steel Corp. (5401 JT)
Nomura Holdings Inc. (8604 JT)
Promise Co. (8574 JT)
Sumco Corp. (3436 JT)
Sumitomo Metal Mining Co. (5713 JT)
Sumitomo Trust & Banking Co. (8403 JT)
TIS Inc. (9751 JT)
Tokyo Electron Ltd. (8035 JT)
Tokyo Seimitsu Co. (7729 JT)

To contact the reporter on this story: Kiyori Ueno in Tokyo at kueno2@bloomberg.net; Makiko Suzuki in Tokyo at msuzuki13@bloomberg.net.

Last Updated: September 20, 2007 03:32 EDT