Companies Rush To Resume Production In Wake Of Japanese Earthquake and Tsunami

By Sandra Levy , Associate Editor | May 4, 2011

Many nonwovens producers and hygiene companies in Japan have been rushing to restore their production and distribution in the wake of the devastating earthquake and tsunami that hit the Tohoku and Kanto regions March 11. After confirming that their employees were safe, companies didn’t waste any time coming to the aid of their fellow citizens. Some companies made financial donations while others provided hygiene supplies to help the victims in dire need following the earthquake.

Nonwovens Industry surveyed some of the top Japanese companies as well as U.S. companies doing business in Japan.Here’s what we learned about their state of business affairs.

Following the earthquake, Asahi Kasei Group confirmed the safety of all employees in affected areas.The company announced that it suspended operation of the following plants and that the degree of damage to its facilities is currently under investigation: Asahi Kasei Construction Materials Corp. Sakai Plant and Neoma Foam Plant (Ibaraki Prefecture); Ashai Kasei Toko Power Devices Corp. Ishinomaki Plant (Miyagi Prefecture) and Asahi Kasei Metals Ltd. Tomobe Plant (Ibaraki Prefecture).

No forecast for the resumption of operation was available at this time. The impact of the earthquake onAsahi Kasei Group’s consolidated financial results is also unclear at this time and an announcement will be made promptly in the event that a material impact is anticipated, according to the company.

Pigeon Corporation reported that based on information available at this time, there are no human casualties among employees of the company or its affiliates. The company suspended shipment operations at its Tsukuba Office (East Japan Distribution Center) as of March 11 due to some damage to warehouse equipment and products.Although planned power outages by Tokyo Electric Power had an impact on operations, the company was working to restore operations so that it could resume shipments in the days following the earthquake.

Japan’s Earthquake Will Add To Economic Challenges

A massive earthquake, devastating tsunami and the resulting nuclear crisis which hit Japan on March 11th, 2011 will add to Japan's economic challenges of huge government debt, shrinking labor force and fragile consumer and business confidence, according to Euromonitor International.

In 2010, Japan was the third largest economy in the world in terms of nominal total GDP ($US), behind the U.S. and China.

The disaster occurred just as Japan started to recover from a 20-month deflation period and an economic recession. Annual real GDP grew by 4.0% in 2010, up from a contraction of 6.3% recorded in 2009 amidst the global economic downturn.

Implications for Japan include the following:
The earthquake has caused a severe disruption in economic activities, affecting Japan's exports and its struggling economy. A number of plants in the Tohoku region which manufacture cars and electronics, Japan's major exports, were damaged or closed down. In addition, ports, roads and other infrastructure were destroyed. This has impacted the distribution networks and led to some production suspensions across Japan and the Asia Pacific region. Exports have been a major driver of Japan's economy, which accounted for 14.1% of total GDP in 2010;

While no official estimates have been released, rebuilding the damage will impose a large burden on the Japanese government. Although reconstruction efforts will create jobs and boost some economic activities, the large spending will worsen Japan's debt burden and fiscal deficit. Total public debt stood at ¥1,078 trillion (U.S. $12.3 trillion) in 2010, accounting for 225% of total GDP, the highest level in the world.

The damage and close down of nuclear reactors will affect energy supplies in Japan, thus leading to power shortages. Electricity produced by nuclear generation made up 26.8% of Japan's total electricity production in 2010.

Power shortages and disruption of economic activities will put upward pressure on food and fuel prices in Japan, hurting consumers. Rising prices, however, may stimulate the economy and encourage more investments in the long run. Japan's economy recorded a deflation of 0.7% in 2010, slightly up from a deflation of 1.3% in 2009.

The human loss caused by the earthquake and the long-term negative impact of the nuclear radiation on public health will put a toll on Japan's workforce, which has already been shrinking due to rapid population aging. The share of population aged 15 to 64 (the working-age population) to the total population in Japan declined from 68.1% in 2000 to 63.7% in 2010 and is estimated to go down further to 59.3% by 2020;

The earthquake and its aftermath in the form of a nuclear crisis will add to uncertainty, thus undermining consumer and business confidence in Japan. The Bank of Japan provided emergency liquidity to the tune of ¥22.0 trillion (U.S. $267 billion) immediately after the earthquake in an effort to stabilize financial markets, bolster confidence and ensure liquidity for businesses.

Finally, The World Bank estimates that it would take Japan up to five years to rebuild from the March 2011 earthquake and tsunami with costs ranging between U.S. $122-235 billion. It also estimates that the quake would hurt the country's real GDP growth in 2011 by an estimated 0.5%. Economic growth, however, could pick up in late 2011, owing to reconstruction efforts.

Regarding its Hitachiota Distribution Center, location Hitachiota City, Ibaraki Prefecture, the company stated, “As of March 11, shipment operations have been suspended due to some damage to products and power outages. “We are working to restore operations with a view to resuming shipments in the next few days. Due to planned power outages, however, as well as difficulties in securing modes of transportation, we are currently yet to confirm the timing of resumption of shipments.”

Pigeon announced that at its production facility for baby wipes and wet tissues—PHP Ibaraki Co., Hitachiota City, manufacture of all products has been suspended due to light damage to the factory building and water supply stoppage. “We are working to restore the situation with a view to resuming operations, which are also being affected by planned power outages. We are currently working to resolve the issue in order to restart production as soon as we can restore water supply, inspect production equipment and secure the necessary personnel. At present, Pigeon is assessing the potential impact of the earthquake on its business performance for the fiscal year ending January 31, 2012. We will quickly disclose any relevant information as soon as it becomes available.”

Kao Corporation also reported that there are no known employees who have suffered serious injuries. The company is continuing its efforts to confirm the safety of other Kao Group employees whom it has not yet been successful in contacting.

“Due to the earthquake, four of our plants in the Tohoku and Kanto regions suspended operations after sustaining partial damage. However, we are striving for the earliest recovery and resumption of regular operations. In the interim, Kao will respond to the situation through efforts such as shifting manufacturing operations to other plants. Kao’s priority is to supply products to the affected area, which may cause the supply shortfalls elsewhere for some of our products. Some of Kao Group’s logistics and sales facilities have sustained damages and we are currently in the process of confirming details of the damages.”

Kao will make an announcement if it concludes Kao Group’s business performance is forecasted to be seriously affected by the earthquake.
rnIn the meantime the company said it is providing diapers, sanitary napkins, detergents, and toothpaste in cooperation with national and local governments.

Procter & Gamble corporate spokeswoman Robyn Schroeder said that all P&G offices and plants are operational and all employees have been accounted for and are safe.

“We have three plants in Japan.All are operational at this time. The plant that was suspended is located in Takasaki.It makes Fabric Care products.The plant was restored within 48 hours while facing some challenges due to limited material supply, planned power black outs and disruption to transportation.P&G has committed $1.2 million in support for earthquake relief including monetary and product donations. Product categories we are working to provide include diapers, oral care, feminine hygiene, hair care, pet care and skin care.We will continue to provide assistance as requested by our relief partners and local government officials,” said Ms. Schroeder.

Kimberly-Clark, which also has operations in Japan said that fortunately, its Japanese operations are headquartered in Yokohama, which is significantly south of the hardest hit areas of Japan. “We have less than 50 employees in Yokohama, and all have been accounted for and are safe. We do not have manufacturing assets in the country. Most of our business in Japan is in healthcare. It represents a small portion of Kimberly-Clark’s overall business.We continue to monitor the situation as the safety of our people is our number one priority,” said Stephanie Anderson Forest, senior manager—Global Corporate Communications.

Mitsui announced that the company hasn’t had any major damage to its facilities including those at its Tohoku office. “Employees are all safe and unharmed, and the plant is in operation today. We are currently checking the situations of our affiliated companies. We will issue updates on our situation from time to time on our website, ”stated the company.

Finally, Mitsui & Co. announced it was making a total ¥400 million cash donation including ¥20 million, which was committed earlier in order to aid emergency relief efforts in the Tohok region.

Company spokesperson Yasuhiro Matoba, of Toyobo Co. Ltd.’s said, “To date, there have been no reports of harm or injury to any of the Toyobo Group's personnel. Damage to the group's buildings, equipment, and other property has been extremely minimal. Our nonwoven plants are operating as usual.”

As of March 14, Kuraray stated that operation of its Kashima plant was being suspended after the quake. “We are earnestly checking on the damage to our facilities and making every effort to restore. All plants except Kashima are being operated as usual. No injuries among all of our employees and their families including domestic group companies and partner companies have been reported. We will devote all our efforts to our recovery as we ask for your kind understanding and assistance,” the company stated.

Meanwhile, Unicharm responded to quake victims who are in dire need of daily commodities. “Unicharm has boosted the production of disposable diapers and feminine hygiene products by putting two of its factories, including one in Kagawa Prefecture into round the clock operation since March 12.

KeiichiJibiki of Unicharm contacted Nonwovens Industry and said, “Unicharm confirms that every company employee and its family in Japan is safe and fine. Our Fukushima factory has some damage.”

Sanitary napkin and diaper machinery manufacturer Zuiko Corporation’s Curtis Woo said,” The devastating earthquake and the horrendous tsunami that followed was an unbelievable event.Although we are located about 500 kilometers (about 310 miles) south of Tokyo and 700 kilometers (about 435 miles) from the disaster area, we still felt the ground shake. The steady sway of our building lasted for quite a long time and one could only imagine what it was like near the quake's epicenter. Fortunately, our facilities and machinery did not sustain any damage. All of our employees and their families are safe.Like the rest of the world, our eyes and hearts are on the recovery effort in Eastern Japan.Recently, our teams of engineers visited customers and business partners located near the area to help get their businesses back on-line.To help evacuees, our employees and visitors can donate money at a number of donation boxes set up at our facilities in Osaka.

It is only a small part but there is still much more to do as the long rebuilding process continues.”

Kin Ohmura of Osaka Chemical Marketing Center told Nonwovens Industry,“The earthquake, which occurred around Tohoku region on March 11, has brought about a large damage in that region.”

However, as a whole, no major effect could be seen in the nonwovens industry for the present.According to reports, the processing center of the subsidiary of Japan Vilene is the only plant that was forced to halt the operation among the major nonwovens manufacturers.
Because the workshops of nonwovens makers are concentrated on the Western region of Tokyo in Japan, the damage by the earthquake remains in a small range.

Nevertheless, the mobile production has been decreasing, because of the difficulty of the procurement of the component for automobile. As a result, demand for automotive nonwovens would have decreased.

After all, the cutback of the demand for nonwovens has been a concern, in spite of a few direct damages to the nonwovens manufacturers in Japan by this earthquake.”

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