Economic aftershocks of Japan quake hit Asia

Economic aftershocks of the devastation in Japan are
rolling through Asia. It is here, among Japan’s neighbors, that the
reverberations of the catastrophe are being felt hardest.

Automakers in Thailand are slowing production. South
Korean electronics manufacturers face shortages of critical parts. Thousands of
Japanese have canceled trips to Taiwan. Panic buying has driven up prices of
Japanese cameras in China, while Indian policymakers brace for higher oil
prices.

The 9.0-magnitude quake and tsunami that laid waste to
Japan’s industrial northeast on March 11 and triggered an unfolding crisis at a
crippled nuclear power plant has exacted a terrible human toll with estimates
of more than 10,000 dead and hundreds of thousands homeless. It might also undermine
Japan — and China — as manufacturing bastions as the catastrophe gives global
companies further reason to spread suppliers over more countries to avoid
reliance on a handful of production powerhouses.

“Even before the Japan disaster, there was a sense
that many multinationals had become too dependent on a single source of
production,” said Frederic Neumann, HBSC’s co-head of Asian economics
research. “The broad trend to diversify production will not just affect
Japan, it will affect China. China’s production has become very
concentrated.”

South Korea, a manufacturing force in its own right, has
been among the first to shudder as Japanese suppliers grappled with damaged
factories and power shortages.

SUV and luxury sedan maker Ssangyong Motor Co. is facing
production constraints because of shortages of Japanese parts, said its
chairman Pawan Goenka. “Most of the parts sourced from any given country
are developed over time,” he said. “It’s not possible in most cases
to switch sources. By the time you’re able to switch sources the crisis will be
over.”

Samsung Electronics Co. and Hynix Semiconductor Inc. buy
50 to 60 percent of the wafers they use to make computer chips from Japan’s
Shin-Etsu Chemical Co., which shut two factories damaged in the quake. Operations
at other plants have been affected by rolling blackouts, the Japanese company
said on its website.

Samsung Heavy Industries Co. gets 30 to 40 percent of the
large metal plates it uses for shipbuilding from Japan. “If the disaster
in Japan lasts and affects our supplies, we would have to consider ordering
more from our South Korean and Chinese suppliers,” said public relations
manager In-chun Hwang.

Profits at Taiwanese electronics firms will likely slump
in the second quarter due to shortages of Japanese components, said Alex Huang,
an analyst at Taipei’s Mega Securities Corp.

In mainland China, businesses have already started
looking for replacement markets for the some $100 billion of exports they ship
to Japan annually.

Chongqing Kinglong Fine Strontium Chemical Co., in the
southern megacity of Chongqing, sells more than 80 percent of the strontium
carbonate it produces to Japan, where it is used to make LCD monitors. “We
may have to expand our domestic market to deal with the impact,” a company
spokesperson told the Chongqing Times newspaper.

Many Chinese manufacturers that use imported components
are still able to run on inventory, but companies that rely on high end
Japanese electronics and auto parts are bracing for shortfalls and rising
prices, said Wang Shaopu, director of the Center for Pan-Pacific Studies at
Shanghai’s Jiaotong University.

Though disruption to supply chains and production is
being felt across Asia, most economists say the impact of the Japanese disaster
on regional economic growth will not be severe. The quiet message behind that
belief is that Japan, which lost its spot as the world’s No. 2 economy to China
last year, doesn’t have as much clout as it used to.

“Japan is still important but it’s a much smaller
piece of the global economic pie and much less important to the global supply
chain than it has been historically,” said Moody’s Analytics chief
economist Mark Zandi.

Japan’s contribution to Asia’s growth has been near zero
for the last five years, says Moody’s. China accounts for over 20 percent of
global growth, and U.S. consumers alone are about twice as important for global
growth as Japan’s entire economy, according to UBS.

Even in its mainstay electronics component manufacturing,
Japan’s power has waned. In 1990, Japanese companies were responsible for a
third of global electronics components exports. By 2008, their share had
halved, as producers in South Korea, China, Taiwan, Thailand, Singapore, the
Philippines and Indonesia picked up market share.

What companies are reluctant to discuss is how they could
benefit from Japan’s tragedy.

In Taiwan, shares of steel, plastic and chemical firms
have all risen since March 11.

“Japanese steel and chemical output may be reduced
by up to 40 percent after the quake and prices have already soared,” Huang
said. “Taiwanese firms will further benefit from Japan’s reconstruction
needs.”

Potential beneficiaries in China are iron and steel
producers and food producers, who could step up exports to Japan as fears mount
of radiation contamination from the crippled Fukushima nuclear plant, he said.
That, however, would exacerbate already rising food prices in China.

So far, speculators have been the clearest winners.

Shoppers in China stripped salt from supermarket shelves,
panicked by the unlikely possibility that the salt supply would be contaminated
by radioactive fallout or in the false belief that table salt protects against
radiation illness.

Some then sold the salt in store parking lots for ten
times the original price.

BIZsotyr

People shop for produce at a makeshift store in Kesennuma, northern Japan, on Sunday amid new fears about food products contaminated by radiation.
Photo: AP
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