By Randy Fabi and Francis Kan
SINGAPORE (Reuters) - Japan's earthquake forced port closures and shutdowns of oil refineries and metal plants in the world's third-biggest economy on Friday, rattling commodity and energy markets as participants weighed up how quickly activity could return to normal.
The magnitude 8.9 earthquake, the biggest to hit Japan in 140 years, struck the northeast coast, triggering a 10-meter tsunami that cleared everything in its path from houses to cars and set farm buildings on fire. At least 59 people have been killed.
"This natural disaster could result in another sharp rise in risk aversion on markets and a continuation of yesterday's correction on commodity markets," Commerzbank said in a report. "The demand for oil could be lower, at least temporarily, because of the earthquake."
ICE Brent crude oil fell more than 2 percent to around $113 a barrel, partly due to the earthquake.
Tokyo gold futures rallied about 0.4 percent soon after the quake, but has since turned lower by around 0.7 percent at 3,473 yen per gram. Tokyo rubber fell 3.6 percent to 384.1 yen.
Metals firm Mitsui Mining said operations at its Hachinohe zinc smelter, with a capacity of 112,000 tonnes a year, were halted by the earthquake, and employees evacuated.
All Japanese ports have closed, with discharging operations stopped, shippers said. Top refiner JX Nippon Oil & Energy Corp halted operations at three plants, while fire engulfed a storage tank at a unit of Cosmo Oil Co. The two make up about 20 percent of the country's total refining capacity.
"It's a big mess. All discharge operations are suspended in the area," said one shipbroker.
TV footage showed several ships damaged by the tsunami including a large panamax vessel, which typically could carry up to 80,000 tonnes of coal, iron ore or grain, a second Tokyo-based shipbroker said.
A ship carrying 100 people was also swept away, the Kyodo news agency reported.
"Most or all coal stocks will be washed out at many of the coal-fired power plants," he said. "Ports will be closed at least for a short period until damage assessments can take place."
Around 4.4 million homes were without power in northern Japan, media said.
Hokuriku Electric Co said all three reactors at its Onagawa nuclear plant in northern Japan shut down automatically.
Some 2,000 residents living near a nuclear plant in Fukushima prefecture, north of Tokyo, were told to evacuate but the government said no radiation was leaking. It said the evacuation was a precaution after a reactor cooling malfunction.
Electric Power Development (J-Power) has also halted operations of its Isogo thermal plant in Yokohama, Jiji reported.
Mitsubishi Chemical halted operations at two naphtha crackers at Kashima after a power outage. The units produce 828,000 tonnes per year of ethylene, or around 11 percent of Japan's overall capacity.
Asian fuel oil's front-month timespreads climbed $1.00 a tonne on Friday, after the earthquake forced nuclear plants to shut down, possibly boosting fuel demand, traders said.
Japan is expected to seek more supplies of low-sulphur fuel oil (LSFO) for power generation due to the shutdown of several nuclear plants, traders said.
"I would expect that to happen and soon, and they would probably have to pay up if the demand is for prompt-arrival cargoes and in large volumes, as overall supply in Asia is quite small and quite niche," a Singapore-based LSFO trader said.
Most of the region's supply of 100,000-150,000 tonnes a month comes from Brazil's Petrobras, which produces the residual fuel from its refineries. Supplies also come from traders such as Vitol, Trafigura and Westport, who blend the cargoes, and Indonesia's Pertamina, which exports about 2 million barrels of low-sulphur waxy residue (LSWR) a month.
Petrobras said operations were normal at its 100,000 barrel per day Nansei Sekiyu refinery.
Middle distillates also strengthened after the quake, with gas oil's April/May timespread flipping into positive territory on the prospect of supply disruptions out of Japan, traders said.
Base metals reacted negatively to the quake, with copper and aluminum extending earlier losses. London Metal Exchange copper dropped by around $200, or more than 2 percent, after the quake, to touch a three-month low of $9,045. Aluminum shed more than 2 percent. Japan was expected to produce 1.6 million tonnes of refined copper in 2011, about 7.6 percent of world output. Most of Japan's eight copper refineries were probably far enough away from the quake epicentre to escape serious damage. But two, the 250,000-tonne-per-year Onahama plant and the 217,000 tonne Hitachi operation, both owned by Pan Pacific, were close enough to the coast for analysts to describe them as at risk. Japan produces around 670,000 tonnes of zinc, or 5 percent of world output.
(Additional reporting by Florence Tan, Yaw Yan Chong and Nick Trevethan in Singapore; Writing by Manash Goswami and Randy Fabi; Editing by Clarence Fernandez and Sambit Mohanty)