6/3/2011 | Japan Steel Works sees shift away from nuclear

Source: Bloomberg via The Japan Times
Date: Friday, June 3, 2011

Japan Steel Works Ltd., a maker of nuclear reactor parts for customers from Areva SA to Toshiba Corp., will shift sales to nonatomic 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 at the company's headquarters in Tokyo. 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 expansion at its Muroran factory in 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. "We must do whatever we can to overcome the situation."

Prime Minister Naoto Kan last month said he will reconsider the long-stated goal of increasing 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 2.1 percent to ¥581 at the 11 a.m. trading break on the Tokyo Stock Exchange on Thursday. The stock has dipped 28 percent since March 11. It expects orders for parts used in nuclear stations and power plants to reach ¥41.1 billion for the year through ext March, or 40 percent less than the previous forecast, it 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 increase capacity to produce steel parts for 12 reactors a year, up from 5.5 a year earlier, Sato said.

The factory's steel ingot and forging is running at 60 to 70 percent of capacity, the president said. The company may look into reducing capacity by removing old facilities if the gap between supply and demand widens, he said.