Soaring prices of construction materials have scared off contractors and are stalling projects in the areas of northeastern Japan that were devastated by the March 2011 quake and tsunami.
Soaring prices of construction materials have scared off contractors and are stalling projects in the areas of northeastern Japan that were devastated by the March 2011 quake and tsunami.
Fewer companies are bidding for public works projects in the Tohoku region. And those that do bid often submit prices beyond the budgetary ranges of the local governments.
The Miyagi prefectural government failed to find contractors in 32 percent of bids for public works projects from spring to December 2012, a rate 10 times higher than before the Great East Japan Earthquake.
The figure for Iwate prefectural government projects was 14 percent, a nearly fivefold increase.
The city of Kamaishi, Iwate Prefecture, could not even find a company to rebuild a fire station damaged by the tsunami after twice calling for bids.
The project will probably not be completed until spring 2014, a year later than the city had expected. Firefighters have been forced to work out of temporary prefabricated buildings.
In Minami-Sanriku, Miyagi Prefecture, two rounds of bids since the end of last year failed to determine a contractor for repairing a road in a coastal district.
“Nothing has changed,” said a 77-year-old fisherman living in nearby temporary housing.
Senior officials of construction companies in the Tohoku region say they are afraid to submit bids because the huge demand in Tohoku has pushed up the prices of construction materials, particularly for ready-mixed concrete used in buildings and roads.
The prices have risen in 29 of 42 districts in Miyagi, Iwate and Fukushima prefectures, mainly coastal areas damaged by the tsunami, since February 2011, according to the Construction Research Institute.
In Sendai, ready-mixed concrete sold for 11,550 yen ($123) per cubic meter in February, 43 percent higher than pre-quake levels and marking the largest increase in all districts.
Fresh concrete is produced by mixing water, cement, sand and crushed stone. The prices of sand and crushed stone have also skyrocketed.
According to a national industry association, shipments of ready-mixed concrete in the three prefectures rose by 80 percent during the nine months through December, compared with the same period the previous year.
In addition, 64 percent of construction companies in the disaster areas say they are short of workers, according to construction industry figures.
Fresh concrete must arrive at construction sites within about 90 minutes after being mixed at concrete plants.
In the Kesennuma area of Miyagi Prefecture, an industry cooperative plans to spend 800 million yen to add two plants to the existing four as early as this spring. But the six plants would supply only one-third of the volume required in the area.
Producers are reluctant to make substantial investments to match the rise in demand in the Kesennuma area because it is expected to fall back to pre-quake levels in fiscal 2016.
The government plans to spend more than 10 trillion yen on public works projects under the fiscal 2012 supplementary budget and the fiscal 2013 budget to shore up the nation’s economy.
If contractors compete to secure construction materials and laborers across the nation, thereby fueling the rise in prices, recovery of the disaster areas could be further delayed.
In December, the price of ready-mixed concrete rose 200 yen to 12,500 yen in 17 of Tokyo’s 23 wards, although it had previously remained flat.
“We are worried that the procurement of materials from outside the disaster areas will stall,” a fresh concrete industry official in Sendai said.