The Aftereffects of Hurricane Harvey on Shipping – What to Expect
09/01/2017 — Jerry Spelic
One of the most devastating storms of the past century, Hurricane
Harvey, has left its destructive mark on Houston, Texas, and its impact
will create a ripple effect on shipping that will be felt for months, if
The entire PartnerShip team holds everyone impacted by Harvey in our thoughts, and we'd like to thank everyone that has assisted in the relief efforts.
Because it is such an important part of our transportation system, the damage caused by Harvey will stress already tight trucking capacity, according to supply chain experts at freight loadboard and data firm DAT Solutions. With the additional influx of inbound relief from FEMA and other organizations, additional stress will be put on capacity, which will likely push rates up in the coming weeks and months.
According to DAT, inbound and outbound freight volume for Houston was down 10 - 15%, and its analysts expect that number to hit 75 or 80 as storm clean-up begins.
Logistics research firm FTR predicts similar countrywide supply chain effects and increases in rates. “Look for spot prices to jump over the next several weeks with very strong effects in Texas and the South Central region,” according to FTR economist Noël Perry. FTR noted that rates gained 7 percentage points in the five months after Hurricane Katrina in 2005 and spot market rates jumped 22% in the weeks following massive snowstorms in 2014.
FTR states that the most immediate effect on capacity is caused by trucks waiting for the area to become passable so they can resume operation. Longer-term effects to capacity will include the relief shipments, additional construction supplies as the area rebuilds, reduced productivity due to freight lane shifts and rerouting, and increased congestion at loading docks caused by these supply chain disruptions.
Other considerations for shippers:
- Harvey has shut show about 20% of US oil refining capacity in Corpus Christi, Port Arthur, Lake Charles and Houston. The disruption will drive up fuel prices and the fuel surcharges carriers charge for every load.
- As noted, carrier capacity is going to get tighter. FEMA and other agencies are putting pressure on the market to move equipment and supplies to the area. This capacity tightening should first affect flatbeds to move heavy equipment, then reefers to move food, then dry trailers for dry goods and other supplies.
- It is likely carriers may struggle keeping their commitments to you in the short-term as FEMA and other agencies will pay a premium to move needed equipment and supplies. You may need to shift your carriers around in order to secure the capacity you need.
- Your transportation costs will increase. Be prepared to pay 5 - 22% more in the short term.
- Your customer demand will change. Your customers or suppliers may cancel shipments, or add shipments, or reroute shipments. Until operations in the Houston area resume and get back to normal, there will be interruptions in every industry’s supply chain.
Working with a freight broker can help you mitigate the service interruptions, capacity issues and rising costs associated with Hurricane Harvey. Contact PartnerShip at 800-599-2902 or use our contact us form to see how we can help you ship smarter so you can stay competitive.