Japan's reconstruction steel demand to fall short

Japan's reconstruction steel demand to fall short.

Steel demand in Japan will fall short of expectations as political wrangling holds up cash injections after a devastating March 11 earthquake and tsunami, while the construction sector is battling a deep slump, hobbled by a strengthening yen.
Japan's construction steel sector has shrunk nearly in half over the past two decades, and the absence of large additional demand amid weak prices will further dent prospects, speeding a revamp of giants such as Nippon Steel Corp and JFE. The reconstruction bill after the magnitude 9.0 earthquake and ensuing tsunami, which devastated fishing and farming villages in northeast Japan and caused the world's worst nuclear crisis in 25 years, runs to $220 billion.
The government has said it would spend 19 trillion yen ($250 billion) over the next five years, but analysts have warned a political deadlock could frustrate efforts to push reconstruction into higher gear.

"The magnitude of the demand increase from reconstruction will be ultimately disappointing this time due to a delay in government spending," Credit Suisse analyst Shinya Yamada said.
"Demand will be too little and too late, not enough to give a decent boost to a long-term decline in domestic demand."

Some steel industry officials had estimated the world's costliest natural disaster would swell the need for construction steel by 50 to 80 percent over the 3 million tonnes of new demand triggered by the 7.3-magnitude Kobe earthquake in 1995.
But more recently analysts have been slashing forecasts for additional demand for products such as rebar and shaped steel.