Tsunamis could make getting steel, cement to the U.S. more difficult

Demand for rebuilding materials and a tighter shipping market that could result from the Dec. 26 tsunamis that struck Southern Asia might make getting steel and cement in the United States more difficult, according to an economist for a U.S. contractors’ association.

“I think it will be hard to tell how big the effect will be until we see how much money is available for rebuilding,” said Ken Simonson, chief economist for the Associated General Contractors of America. “There could be an impact through a tighter shipping market. Part of the reason steel prices spiked early in 2004 was limited ship capacity.”

If bulk carriers are chartered to take relief supplies and rebuilding materials to Asia, materials such as steel and cement, which were already in short supply, could be tougher to acquire in the United States.

Khalid Hashim, managing director of dry-cargo ship owner Precious Shipping Company, said in a note cited by the Wall Street Journal that reconstruction efforts will ultimately boost business for ship owners operating in the Asia region as demand for building supplies increases.

While the loss of tourism will negatively impact Southern Asian economies temporarily, the influx of foreign aid for rebuilding might actually boost the economies of the largely poor areas hardest hit by the tidal waves, Kathy Bostjancic, a senior economist at Merrill Lynch, told the Associated Press.

“Normally, these things are perversely a positive as they lead to new construction,” Shane Oliver, chief strategist for AMP Capital Investors, a wealth management company, told The Australian newspaper.

The U.S. government has pledged an initial $15 million economic aid package, while the European Commission and Japan are donating $30 million each and Australia is providing $8 million. Japan has already decided how to allocate some of its aid money, with $1 million going toward buying generators and tents in Sri Lanka and $510,000 going to water tanks and materials to build temporary housing in the Maldives. United Nations Undersecretary Jan Egeland, who is in charge of emergency relief coordination, told AP the disaster could be the costliest in history, having created billions of dollars in damage.

But because the tsunamis didn’t destroy any major industrial or port facilities, instead striking areas where many people live off the land as farmers and fisherman, analysts expect the overall economic impact of the disaster to be small. With the exception of tourism facilities, little property in the region was insured, leading to estimates of less than $5 billion in insurers’ losses. Insurers in Florida paid out $20 billion this year after four hurricanes hit the state.

Spending on reconstruction of vacation resorts could spur the economies of the areas worst affected and help them get over the loss of tourism revenue, Hans Goetti, an investment strategist with Citigroup Private Banking in Singapore, told the London Financial Times.