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
not years.
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.
Even
if you do not have facilities or do business in Texas, Harvey
will affect your business because freight and transportation networks
nationwide will need to adjust, and the country’s entire supply chain
will need to compensate. Houston is one of the country’s most important
and busy freight hubs. It is one of the top inbound and outbound freight
hubs and is a main transfer point for freight coming from Mexico and it
also is a busy and large sea port.
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.