As Hurricane Harvey continues to dump rain on Southeast Texas—particularly in and around Houston—our thoughts and concern are first and foremost with the residents of those areas and the first responders and volunteers helping in the storm’s aftermath.
Our thoughts do also turn to supply chains, as the seaports in Houston and Corpus Christi closed last week in advance of the storm, and rising waters from days of heavy rains and catastrophic flooding have closed long stretches of highways and railroad tracks. The result is that freight transportation in a major American hub has slowed to a virtual standstill.
Houston is a key consolidation point for imports of vehicles and appliances made in Mexico. What’s more, the city’s port is an early stop for ships passing through the Panama Canal, which was widened last year to allow bigger vessels to pass through. Many retailers and manufacturers of all types now import goods from Asia through Houston’s port instead of through West Coast ports. Since large container ships typically make multiple stops, several days’ delay in dropping off cargo in Houston will have a cascading effect on stops at ports in Savannah, Ga., New York and even the Dutch port of Rotterdam.
Railroad lines are seeing an impact as well. For instance, Union Pacific Corp. has halted all freight rail traffic bound for Houston and surrounding areas, and BNSF Railway also sent a notice to customers, saying that trains destined for Galveston would be held at other locations until further notice. Railcars were being moved away from the lowest-lying areas, according to the notice, and rail crews were on alert for any needed track repairs.
Trucking fleets are naturally effected as well. Indeed, the number of Houston-area trucking runs requested fell 80 percent, according to the most recent data from DAT Solutions, an online load board. All told, the storm effected up to 10 percent of the U.S.’s trucking capacity, according to Noël Perry, chief economist with Truckstop.com, another online load board. Consequently, companies around the country may struggle to line up enough trucks to ship goods. Compounding matters, albeit in a good way, many trucks that are available are being turned over to relief and rebuilding efforts. Wal-Mart, for example, has sent more than 1,000 big rigs to hard-hit areas and evacuation centers, with most carrying water.
The impact means that shipping costs could rise anywhere from five percent to 22 percent, Perry says, based on the market’s response to past natural disasters such as Hurricane Katrina and the “polar vortex” that hit the Northeast in 2014. Many freight companies say they have no idea when they will resume operations. Even after the weather clears, it could be days before floodwaters recede enough to allow dockworkers back into ports, or trucks to resume routes.
“This may be unprecedented when all is said and done,” Mark Rourke, chief operating officer at trucking company Schneider National, says in a Wall Street Journal article. He said it could be three days before Schneider employees can access some terminals in the city and potentially two weeks before normal operations resume.
Has your company or its suppliers seen an impact from Harvey’s rain and flooding? Were plans made last week to change shipping and transportation strategies to mitigate risk? Finally, is your company involved in relief efforts?