Steelmakers are confident they can meet the expected increase in demand for their products in the post-quake reconstruction work.

Although the demand for steel products is estimated to be huge, it will be spread over two to three years. "We don't expect a sudden spurt in demand causing severe shortage," said Yang Baofeng, a steel industry analyst at Orient Securities in Shanghai. "The reconstruction work will take time."

For that reason, industry analysts said, any sharp spurt in steel product prices is unlikely although the projected rise in demand may put some pressure on prices.

Dai Guoqing, deputy director of Beijing-based Shougang Co's research institute of development, said: "The higher steel demand after the quake is only one of the many factors influencing the demand-supply equilibrium, and is by itself not drastic enough to drive steel prices up significantly."

Analysts also predicted some public works projects planned earlier for the quake zone will be cancelled or shelved.

"That would ease the demand pressure, allowing a diversion of supply for the reconstruction," said Wang Jianhua, deputy director of the research center of Mysteel, a leading provider of industry information.

The damage to plants and machinery of steelmakers at the epicenter is believed to be limited and won't have much effect on overall supply and demand.

The average monthly steel output of Sichuan Province and Chongqing municipality accounted for no more than 3 percent of the nation's total. In April, the combined steel output of Sichuan and Chongqing amounted to 1.44 million tons compared with the national total of 51.6 million tons.

Many steel enterprises have no immediate plans to increase production.

Zheng Ge, a press officer with Tangshan Iron and Steel Co, said the company would adjust its production at some point to meet reconstruction demand. But he added the company has no plans to boost production right away.

"It is still too early to boost production because a full assessment of how much steel will be needed for the reconstruction has yet to be made," said Zheng.

"We expect our current production level plus inventory will be sufficient to meet the increased demand at the initial stage of reconstruction."

Other steel companies agreed. Laiwu Iron and Steel Co said the company is carrying out production as previously scheduled and has no plans to increase output.

(China Daily May 22, 2008)