Katrina One Year Later:
Expectations Overblown

A year after Hurricane Katrina pounded the Gulf Coast, the media is full of retrospective reports on the slow and painful recovery under way in Louisiana and Mississippi. Demand for steel and other construction materials, which has fallen short of some expectations, confirms the lack of great progress in the region.

At this time 12 months ago, authorities were speculating that the storm’s casualties could top 10,000, and that it might be months before residents could return to New Orleans. As it turned out, the actual death toll was a less tragic but still shocking 1,600—and it looks now like a large percentage of the displaced citizenry will never even attempt to return to the troubled city. Pundits predicted the entire U.S. economy could take a serious hit from the hurricane’s effects, when in actuality GDP has kept chugging along, though at a slower pace of late.

Putting a positive spin on the disaster, other experts noted that the recovery effort held much promise for makers of products such as steel and aluminum. With so many roads, bridges, public buildings and homes in need of repair, metals demand in the South was bound to spike. So far, however, that promise remains largely unfulfilled as reconstruction efforts continue to take a back seat to more immediate humanitarian needs and the ineptness of government bureaucracy.

The Bush administration has released $77 billion of the $110 billion in hurricane aid approved by Congress, but $33 billion of those available funds have not yet been disbursed. Most of the $44 billion spent went toward emergency relief efforts such as temporary housing or flood insurance claims. Very little has had a direct effect on long-term recovery in the region, and only a fraction has been spent on repairing infrastructure.

The metals industry continues to pitch in, with many companies offering funds and volunteers to assist the ongoing reconstruction effort. The American Iron and Steel Institute’s Gulf Coast Steel Initiative still has funds remaining from the $1.1 million contributed by a dozen leading steel companies to promote the use of storm-resistant steel framing and roofing in residential construction projects.

Dismal housing statistics suggest that it will be some time before new-home construction creates any major demand for steel framing, roofing or appliances. Tens of thousands of families still live in government trailers and mobile homes with no real timetable for moving to more permanent residences. New Orleans still has no master rebuilding plan. Over 946,000 households have been approved for housing assistance, yet no money has been disbursed to rebuild homes. The State of Louisiana recently began accepting applications for federal grants of up to $150,000 per homeowner, though, so housing construction may get a boost soon.

Katrina did $200 billion in damage to the Gulf Coast infrastructure, and repairing it will undoubtedly translate into greater metals demand over time. But contrary to scenarios imagined a year ago, we now know that recovery will be unexpectedly slow and incremental, as conditions remain very difficult in the Big Easy.