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U.S. INFRASTRUCTURE Wall Street sees stability and a hedge against a slump

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No one likes to profit from tragedy, but the harsh reality is that it sometimes takes one to kick things into high gear.

The deadly bridge collapse in Minneapolis, highlighting the poor condition of much of the nation's infrastructure, is a prime example, and likely will lead to increased infrastructure spending-or so one would hope.

This increased spending, in turn, should benefit the steel industry. Bridge repairs will require steel plate, light beams and structural shapes; new roads and highway supports will gobble up concrete reinforcing bar; and more steel rail will be needed if the nation is to keep up with increasing demand for mass transportation and rail freight.

But the spending likely won't generate a precipitous cash windfall, analysts said. Instead, the impact of any new infrastructure spending will be felt over the next several years rather than in the next few quarters.

Bridges, for example, can take years to design and build, Mark Parr, steel industry analyst at Keybanc Capital Markets LLC, Cleveland, said. "A bridge is an engineering work of art. Every one is different. Each project is unique. We're talking 2009, 2010. It's not like putting up a new Wal-Mart or a Banana Republic."

And the nation needs a lot more than patched-up bridges, he said. "It's probably fair to say that the spending that has been going on has not been keeping up with normal wear and tear and increasing traffic loads. A reasonable expectation is that this market will be no worse than stable and probably a solid growth market for the foreseeable future."

With the transportation bill signed into law in 2005, the federal government allocated $286.4 billion over six years for infrastructure upgrades and repairs. Even if no new spending were authorized, existing funds are likely to be allocated more quickly because of the Minneapolis tragedy, Tony Taccone, a partner at Pittsburgh-based First River Consulting, said. "It's going to be spread over a long period. This may slightly accelerate the curve, but I think generally it's not going to have a huge impact."

Most agree with Taccone's cautious assessment.

"You've got big headlines, which have got the attention of the White House. And people are out inspecting bridges right now. But it won't be a gold rush," said Scott Burns, a metals and mining equity analyst at Morningstar Inc., Chicago.

However, that doesn't mean infrastructure spending won't have some clear benefits for the steel industry, Burns said. The residential construction market is in bad shape and many expect commercial construction to flatten or soften in coming months, he noted, so any new infrastructure spending could help steel companies hedge against declines in other markets.

But some question whether the bridge collapse and resulting media frenzy will have any lasting effect on public policy.

"I think they'll forget about it in a month," Charles Bradford, president of Bradford Research/Soleil Securities Inc., New York, said. "And it's too bad, because we need very, very major infrastructure rebuilding, and the steel companies would be major beneficiaries of that."


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