Five months after a devastating earthquake, Chile faces a mandate to rebuild but not enough domestic steel capacity to meet demand

Jul 01, 2010 | 06:26 AM | Katerina Valdivieso

SANTIAGO, Chile  -  After suffering a disastrous earthquake in February, Chile is starting to rebuild. The government has begun implementing reconstruction plans estimated to cost $8.4 billion, Sebastián Piñera, Chile's new president, said in his first presidential speech in May, with most of the money earmarked to rebuild destroyed hospitals, schools, roads, bridges and airports.

Rebuilding Chile with modern infrastructure more resistant to seismic activity would require an immense amount of steel. Currently, however, Chile only has two iron and steel companies, which together produced just 60 percent of national consumption in 2009. And both were severely damaged in the earthquake.

Piñera also has set a goal of growing Chile's gross domestic product (GDP) by 6 percent annually, an objective which would translate into increased steel demand. Steel consumption increases when economies grow, and in developing countries such as Chile this ratio is very high. Experts estimate that the demand for steel would increase 50 percent more than GDP growth.

Slammed by the worldwide recession, the country's apparent steel consumption, which does not include consumption from inventories, dropped 36 percent to 1.7 million tonnes last year, according to Chile's Association of Metallurgical and Metal-mechanic Industries. So far this year consumption has climbed more than 30 percent compared with a year earlier as the global economy improves. This comes as the country's steel output continues to struggle in the wake of the earthquake and recession. Chile's iron and steel production in April plunged 47.9 percent compared with the same month last year, putting the year-to-date total nearly 12 percent lower than in the first four months of 2009.....

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