China Stops Orders for Japan Scrap Steel on Radiation Concern, Umetal Says

Chinese buyers stopped new orders of scrap steel from Japan and blocked some existing cargoes because of concern over radiation from a crippled nuclear plant, researcher Umetal.com said.

China, the second-biggest buyer of scrap metal from Japan, “stopped taking new orders shortly after the radiation problem was detected and almost all cargoes from Japan were prohibited unless provided with a third-party guarantee,” Zhao Ziyi, an analyst at Umetal.com, said from Beijing. Umetal controls H&C S Holdings Pte Ltd., a Singapore-based scrap metal trader.

Scrap prices are falling after the March 11 earthquake increased supply in Japan, the world’s biggest exporter of scrap steel after the U.S. Concern over radiation leaking from Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant has also disrupted exports of milk products and vegetables.

“Unless the situation at the plant changes, Japan will face difficulty exporting scrap, further loosening the supply- demand balance,” said Shinya Yamada, a Tokyo-based analyst at Credit Suisse AG. “China is also likely to shift purchases to the U.S. and Russia.”

Scrap from collapsed buildings to junked cars is recycled into new steel by melting in electric arc furnaces. Japan exported 6.47 million metric tons of scrap iron in 2010, of which China accounted for 42 percent, according to data from the Japan Iron and Steel Recycling Institute.

The price of scrap iron Tokyo Steel Manufacturing Co. pays at its Okayama plant has fallen 11 percent to 37,000 yen a ton since March 11.

Rumors and Fears

Japanese companies have been damaged by radiation rumors and excess concern about steel and manufactured products, Japan Iron and Steel Federation Chairman Eiji Hayashida said last week, citing cases of overseas ports rejecting Japanese cargoes and vessels avoiding Japan.

“We want authorities to offer the appropriate information based on facts,” said Hayashida, also the president of JFE Holdings Inc.’s steelmaking unit.

The MOL Presence was turned away from the Chinese port of Xiamen after passing more than 120 kilometers (75 miles) off the coast of Fukushima on March 16 as the vessel showed “abnormal” radiation levels, according to a March 25 notice on the website of the Xiamen Entry-Exit Inspection and Quarantine Bureau. Mitsui O.S.K. Lines Ltd., the operator of the vessel, said April 1 tests in Japan showed radiation levels on the vessel were “significantly lower” than results of similar checks in China.

“There’s only a limited number of countries like China that react too much about radiation at this moment,” said Yasuhiro Matsumoto, an analyst at Shinsei Securities Co. in Tokyo. “If such moves spread worldwide, Japan-made products would be blocked overseas.”

Background Radiation

In 1992, residents at an apartment in Taipei were found to have been exposed to excessive radiation for years without knowing, as the building was constructed with rebar made of scrap metal that contained radioactive cobalt-60, according to the Atomic Energy Council.

China set its radiation safety standards at 0.3 microsieverts. The nuclear accident in Fukushima, 220 kilometers north of Tokyo, elevated radiation levels as high as 0.809 microsieverts an hour in Tokyo’s Shinjuku ward on March 15, according to data from the Tokyo Metropolitan Institute of Public Health. It recorded a high of 0.093 microsieverts today.

The International Maritime Organization, a United Nations agency, says shipping operations in and out of Japan can continue as normal, with levels of radiation presenting no medical basis for imposing restrictions.

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