What was the importance of the outcome at the Battle of Shiloh for the conferderates?

In the two months prior to the Battle of Shiloh the Yankees had captured the western two-thirds of Tennessee, including Nashville. Nashville was one of the largest cities in the Confederacy and one of the few with an iron mill capable of casting cannon. The Confederates hoped to reverse this tide and start recovering west Tennessee beginning with winning the Battle of Shiloh. When the Confederates instead lost the battle these hopes were dashed.

Perhaps even more important was the death of the Confederate commanding general, Albert Sidney Johnston. Johnston was one of the best generals the Confederacy had, and was the second-ranking Confederate general, just ahead of Robert E. Lee on the seniority list. The Confederate's western army never had a satisfactory commander after Johnston's death, and went on to lose most of its battles, and probably the war.