TOKYO (Nikkei)–A full four months have passed since the Great East Japan Earthquake, and demand for industrial materials has yet to show signs of taking off despite earlier predictions of a reconstruction-led boom.
The temporary Kesen Ohashi bridge opened for traffic on July 10 in Rikuzen-Takata, Iwate Prefecture. It will likely be a long time before the bridge, which was washed away by the tsunami, is rebuilt.
The main reason is that public works projects to restore housing and social infrastructure are proceeding at a snail’s pace. This is because efforts to draw up reconstruction plans have been delayed on the part of local governments, and also because the central government has been having difficulty removing quake debris, a step needed to be taken before reconstruction work can begin in earnest.
The contract value of public-works projects, an indicator used to monitor trends in construction orders from the public sector, fell 5% on the year in the April-June period for the three quake-hit prefectures of Iwate, Miyagi and Fukushima.
The slide will inevitably have a large impact on local construction businesses because public investment accounts for more than half the money funneled into construction in the Tohoku region of northeast Japan.
Possible output cuts
Naturally, this trend is having an adverse effect on demand for construction materials. Immediately after the disaster, building materials supply was slightly tight because the quake damaged manufacturing facilities and disrupted transportation networks in the region.
At present, however, there is a surplus for most building materials, except for such items as wall materials used to build temporary homes for evacuees.
According to a recent Nikkei survey on inventory levels for fuel and major industrial materials as of the end of May, inventory increased in 12 of the 14 items covered from a month earlier, with six posting double-digit rises.
Particularly noteworthy was that there were inventory gluts for several construction materials, including small bar steel and H-shaped steel beams. Recent large increases in imports of foreign products have also pushed up inventories.
Some manufacturers have moved to reduce production to address the issue.
Given that the much-awaited boom in demand for post-quake rebuilding has yet to materialize, “it will take some time for the inventories of construction materials to fall (to appropriate levels),” said Hideki Matsumura, senior economist at the Japan Research Institute. “Makers of construction materials may have to drastically reduce output this summer.”
(The Nikkei July 12 morning edition)