Japan Steel Works to Target Non-Atomic Energy After Disaster

Japan Steel Works Ltd. (5631), a maker of nuclear reactor parts for customers from Areva SA to Toshiba Corp. (6502), will shift sales to non-atomic energy equipment and may cut idled capacity as the Fukushima disaster curbs orders.

Japan will freeze construction of nuclear reactors and China is likely to delay new orders by a year, slashing component purchases from nuclear plant builders, President Ikuo Sato said in an interview. The company will focus more on wind turbines, steel pipes for natural gas and rotor shafts used in thermal power plants to make up for the shortfall, he said.

Japan’s nuclear accident, the worst since Chernobyl in 1986, coincides with Sato completing an 80 billion yen ($984 million) expansion at its Muroran factory in Japan’s northern island of Hokkaido. The disaster triggered by the March 11 earthquake and tsunami has prompted governments to reconsider the future of atomic energy, hampering efforts by Japan Steel Works to expand nuclear operations.

“I never expected such a crisis would occur in Japan,” Sato, 62, said yesterday at the company’s headquarters in Tokyo. “We must do whatever we can to overcome the situation.”

Japanese Prime Minister Naoto Kan last month said he will reconsider a plan to increase the country’s dependence on nuclear energy. He pledged to generate 20 percent of the nation’s electricity through renewable forms of energy by 2020.

Japan Steel Works shares fell 1.2 percent to 587 yen as of 3 p.m. trading close on the Tokyo Stock Exchange. The stock has dipped 28 percent since March 11.

Falling Orders

Japan Steel Works expects orders for parts used in nuclear stations and power plants to reach 41.1 billion yen for the financial year through March, 2012, or 40 percent less than the previous forecast, the company said May 20.

Sales of power plant components accounted for 20 percent of annual revenue in the last financial year, with more than half nuclear-related sales, according to a May 20 presentation by the company.

The Muroran plant is the world’s only factory capable of producing a nuclear reactor’s pressure vessel from a single block of steel, which results in a stronger vessel and reduces the risk of radiation leaks. The company has almost completed an expansion that will boost capacity to produce parts for 12 nuclear reactors a year, up from 5.5 a year earlier, Sato said.

The factory’s steel ingot and forging plant is running at 60 to 70 percent of capacity, the president said. The company may idle older facilities should the gap between supply and demand widens, he said.

Nuclear Plants

About 440 nuclear power reactors operate globally and more than 60 power reactors are under construction, according to a January statement by the World Nuclear Association.

Japan is reconsidering a plan that called for building nine nuclear power plants by 2020 and more than 14 by 2030, while Germany and Switzerland decided to abandon atomic power. China, building more reactors than any other country, stopped approving new plants “until safety and improved long-term development plans are cleared,” according to a March 16 statement by the State Council.

“While new orders from China will be delayed, we see no change in the nation’s plan to shift to nuclear energy,” Sato said. “We intend to extend the range of parts we offer in markets that promote nuclear energy.”

Japan’s record earthquake and tsunami devastated coastal areas of northern Japan, left almost 24,000 people dead or missing and crippled Tokyo Electric Power Co.’s Fukushima Dai- Ichi nuclear plant.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net

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