Tokyo (Platts)--31Jan2011/654 am EST/1154 GMT

Japan's ferrosilicon imports from Russia in 2010 were 84,401 mt, up 65% year on year and the highest since 2002 when they came in at 90,636 mt, according to the Japanese customs data released Monday.

Russian shipments accounted for 16% of total Japanese imports in 2010, which was down slightly from 17% in 2009. In 2005-2008, Russia's share stood at 3-7%.

China, the world's largest ferrosilicon supplier, accounted for 67% of Japanese imports in 2010. While this was up from 55% in 2009, it was well below the 80% share it typically held prior to 2009.

Japan imported 347,527 mt of ferrosilicon from China in 2010, double the 164,116 mt in 2009, but lower than the 464,205 mt in 2008.

Japan imported a total 514,511 mt of ferrosilicon from 19 countries in 2010, up from 294,656 mt in 2009, as production of crude steel recovered. Japan produced 109 million mt of crude steel in 2010, up from 87 million mt in 2009.

The rise of Russia and the fall of China as suppliers to the Japanese ferrosilicon market suggests that the Japanese steelmakers are diversifying their ferroalloy supply sources, Japanese trade sources said Monday.

In particular, the integrated steelmakers that account for over 70% of ferrosilicon consumption -- such as Nippon Steel, JFE Steel, Sumitomo Metal Industries, Kobe Steel and Nisshin Steel -- are diversifying their raw material supply sources to avoid risks resulting from weather, geopolitical and other issues, sources said.

"The recent Queensland floods hit one integrated steelmaker that was relying heavily in that region of Australia for its coking coal supply, whereas others were not as badly hit as their supply sources were spread out within Australia," said one Tokyo trader, adding that the recent floods have renewed awareness among the Japanese mills on the need for diversification.

Meanwhile, one source from a South Korean ferromoly plant said stainless steel producers are also looking to diversify their sources of raw material such as ferromolybdenum. One Japanese steelmaker is believed to be considering more imports from South Korea rather than Chile, even though Chilean ferromoly is tax-free while imports from South Korea are levied a 3% duty.

RUSSIAN IMPORTS GAIN AMONG INTEGRATED STEEL MILLS

Russia's ferrosilicon exports to ports close to Japanese integrated steelmakers such as Oita and Chiba showed strong gains in 2010, while limited growth was seen at ports shared by integrated mills and smaller electric arc furnace operators such as Nagoya, according to customs data.

The Oita port, used mainly by Nippon Steel, saw imports of 12,990 mt in 2010 -- all of which came from Russia. By comparison, the port saw imports of 5,170 mt in 2009 -- 2,989 mt from Russia and 2,181 mt from China.

"The mills are switching to Russian supply at minor ports (such as Oita) first, as Russian shipments are sealed in smaller container cargoes during winter to avoid impact from heavy snow," said one trader.

Meanwhile, the Chiba port, which is used mainly by JFE Steel, saw ferrosilicon imports of 37,288 mt in 2010, up from 21,052 mt in 2009. Imports from China still accounted for the majority at 21,881 mt in 2010, up from 10,254 mt a year ago. But those from Russia increased to 15,319 mt in 2010, up from 10,798 mt a year ago.

The Nagoya port, shared by Nippon Steel and numerous electric arc furnace operators in western Japan, saw imports of 69,654 mt in 2010, up from 31,485 mt in 2009. Imports from China were 60,944 mt in 2010, up from 23,277 mt in 2009, while those from Russia came in at 7,675 mt in 2010, down slightly from 7,757 mt a year ago.

--Mayumi Watanabe, mayumi_watanabe@platts.com

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