Minimal Impact to the Global Supply Chain?
In the absence of evidence to the contrary, it has become fashionable for some in the global business community to believe that the economic impact of Japan's earthquake will be minimal. No one can truly know the ultimate impact because the world has never experienced such a severe natural disaster in an economy so critical to the global supply chain: This is not Indonesia, New Zealand, Chile or Pakistan -- which have also experienced recent severe earthquakes -- this is Japan.
For the past three weeks, the world's third largest economy has been plagued by chronic power shortages and supply chain disruptions -- the 'new normal,' which is likely to continue for years. Although much of Japan's heaviest manufacturing occurs in its south, which was largely undamaged as a result of the quake and tsunami, the ability to ship components to these facilities has in some cases been severely impacted, and ongoing power supply disruptions threaten to introduce long-term interruption into the production process.
Japan produces approximately 60% of the world's silicon, used to produce semiconductor chips. Shortages in these chips are only now being felt, as manufacturers had a 2-to-3 week surplus of chips prior to the quake. Japanese manufacturers are expected to lose up to $60 billion as a result of interruption in production capability this year due to power disruptions. For manufacturing organizations outside Japan, the long-term impact is more difficult to assess, but businesses as diverse as auto manufacturers, and video game, LCD, and laptop producers, have already been affected.
Businesses throughout Japan have reported difficulty obtaining raw materials and transporting workers. Given that the timing of rolling brownouts is unpredictable, the 'new normal' for businesses involves flexible office hour scheduling and inconsistent transportation links, which are subject to change on short notice. All indications are that this is likely to continue for the foreseeable future, and will become acute during peak usage seasons during the winter and summer. If so, expect a more significant impact on the global supply chain in due course.
The Importance of Chernobyl's Radiation Legacy
Chernobyl resulted in 400 times more radiation being released than was released in the atomic bombing of Hiroshima, but compared with the amount of radiation released during the atomic testing of the 1950s and 1960s, Chernobyl was a small fraction of that amount. Current estimates of the nature of radioactive contamination in the area surrounding the Fukushima plant downplay the significance of a problem. According to an April 2nd New York Times article, and based on a variety of sources of information it gathered, air and food was only considered to be harmful at the plant "after a short period of time", while air, soil, water and food was considered to be "possibly harmful after a longer period" near the plant. Only food was considered to be "possibly harmful" elsewhere in Japan, though most of the prefectures in northeast Honshu had detected radiation in food above the legal limit in Japan. According to the report, there is no current cause for concern elsewhere in the world.
If Chernobyl is any guide for Japan with respect to radiation contamination, this information is in stark contrast with the facts 10 years after Chernobyl. Vast areas of Belarus and the Ukraine remained contaminated.
According to a study released in 2006 by the IAEA, a combination of human activity and precipitation reduced the negative impact of radioactivity on populated areas near Chernobyl, but resulted in the contamination of sewage systems. The main pathways for radiation to impact people was from radionuclides deposited on the ground and the ingestion of contaminated terrestrial food products. The ingestion of drinking water, fish, and products contaminated with irrigation water were considered to be minor pathways toward contamination.
Due to the short half-life of radioactive iodine (just 8 days), the contamination of milk, which was the most immediate concern in the food chain, only remained a real concern for about two months following the period when radiation from Chernobyl was stopped. Contamination of various crops, including green leafy vegetables, was also a concern for about two months, though the longer-term impacts have been difficult to quantify. Longer-term concern with respect to human ingestion of foods were most notable in milk, meat, and vegetables. Japan should expect to need to monitor its food supply, and possibly rely on external sources of these foods, for a long time to come.
Why the Japanese Government Needs to Move Quickly
The focus of much of the press since the quake and tsunami has been on levels of radioactive iodine that has been released into the environment, but cesium-137 is a much greater health concern and has been linked to cancer deaths nine times greater than radioactive iodine, with a half life of 30 years. Last week, for the first time, the Japanese science ministry began to release measurements of cesium-137 in soil around the plant.
The levels were highest from two points northeast of the plant, ranging from 8,690 becquerels/kilogram to a high of 163,000 Bq/kg measured on 20 March from a point about 40 kilometers northwest of the Fukushima plant. The hottest spot is similar to levels found in some areas affected by Chernobyl. Assuming the measurement is no more than 2 centimeters deep, nuclear engineer Shih-Yew Chen of the Argonne National Laboratory calculates that 163,000 Bq/kg is roughly equivalent to 8 million Bq/m2. The highest cesium-137 levels in some villages near Chernobyl were 5 million Bq/m2. If true, Fukushima has already released higher levels of Cesium 137 than Chernobyl, making it the worst source of nuclear radiation release in history.
Given this, the Japanese government must now move quickly to stop the release of radiation from the Fukushima plants. If preliminary information is correct, Fukushima already is the worst nuclear disaster in history. It could become much worse by degrees if the Japanese government hesitates to use every resource at its disposal -- including that of the IAEA and foreign governments -- to solve the problem. In the absence of admitting the severity of the problem and acting with haste, Japan's economy and its people face potentially grave consequences, and the northeast Asia region faces unknown consequences from the release of high levels of cesium-137.
Daniel Wagner is managing director of Country Risk Solutions, a political risk consulting firm based in Connecticut, and senior advisor to the PRS Group.
Follow Daniel Wagner on Twitter: www.twitter.com/countryriskmgmt
There is also the more tragic human issue. The region hardest hit has a highly trained and in some cases very specialized work force. Their skill and training is. in some cases, beyond replacement without long periods of training. Coupled with the total loss of specialized machinery and other tools and equipment, this means an even longer period of recovery than most optimistic projections contemplate. It will require nothing less than a second version of the Marshall Plan for Japan to fully recover. As a result, the era of plentiful, if not inexpensive ("endaka") items from Japan may be over for months or years to come. These problems have not yet begun to make themselves fully felt outside of Japan. When the ripple effect hits the American economy, people in the US should be prepared for another shock.
It also tells us that safetynorms at the size of :" once in a million years' is not enough
Actually, Japan's earthquake preparedness has been focused on the Tokai region between Tokyo and Osaka. A nuclear power plant on the coast there, Hamaoka, has long been the subject of protesters demanding its closure. Rightly so. The impact of a meltdown in one of its three reactors would expose five to ten times as many people, and the impact on the global supply chain would, quite possibly, bring the entire global economy down with it. There is a Rand Corporation study of a terrorist nuclear attack on Long Beach and Los Angeles Harbors that spells this out. Of course, all this is just a picnic in the park compared with an even 'limited' nuclear exchange.
During times of peace, during times of small natural disasters the chain continues to produce. Product is made, shipped and arrives. When something out side the normal parameters happens, it breaks down.
What has to be addressed is national supply that needs to be built here just in case of natural or political turmoil in other countries. That issue could then be used to put Americans back to work.
Yes, what are they waiting for?
Did you ever stop to think that nobody knows how to stop this?
The March 11 earthquake happened 350 miles north of Tokyo on the fault line between the Pacific and the Eurasian faults. Tokyo sits above an intersection of the Pacific, Eurassian AND Philippines faults - the perfect storm of faultlines.
When an earthquake occurs, not all energy is released. Much of the energy is transferred along the fault. Unfortunately, then three plate intersection is downhill (literally) and 350 miles away.
Prior to the March 11 earthquake, the three plate intersection was under tremendous stress. An earthquake could happen today - it may never happen.
One of the lessons sadly learned was the lack of back-up plans in the event of emergency. It was reported that Fukushima had a small first aid kit and one gurney for the north complex.
What, for example, is the status of the south complex, with six more reactors ?? There are 52 reactors in Japan - what contingency plans exist for them ?
While I understand the need for humanitarian assistance, can Japan and the world sustain the interuption in thenproduction supply chain. Japan may have to put on additional shifts in their over seas plants to avoid further losses..
This is an extremely sad time in world history - we must, however, plan for the worst.
No, the Pacific plate went under the North American plate.
http://www.nytimes.com/interactive/2011/03/11/world/asia/maps-of-earthquake-and-tsunami-damage-in-japan.html
Which plates are involved, of course, makes no difference as to the point that ducksawce was trying to make. But I question whether a triple point is more dangerous seismically than a regular two plate boundary. The important thing is how much stress a fault zone can take before rupturing. It took over 100 years to build up the stress that was release by recent quake, for some reason that seismologists are still struggling to understand some subduction zones a resist (to a point) stress without rupturing more than others.
As I contributed above (if the censors let it through), seismologists have learn by studying the historical and geological record, that the subduction zone in the Tokai region is well known for its capacity to take a build up of stress. But the breaking point will be reached, inevitably. It will be ugly.