As Hurricane Sally started to lose strength in the Gulf of Mexico and shift its track toward the east, the possibility of significant disruption to logistics and freight movement appears to be diminishing.
Sally was downgraded to a Category 1 hurricane overnight Monday into Tuesday. However, it was moving slowly at roughly 2 mph, threatening to become far more of a rain event than one with strong winds, with as much as 30 inches of rain forecast over the affected areas near the Alabama/Mississippi border.
Portions of supply chains were taking various steps to prepare for the storm, though with wind damage and disruptions now likely to be far less than Hurricane Laura, which hit the Gulf Coast near the Texas/Louisiana border Aug. 27.
As of midafternoon Tuesday, the American Logistics Aid Network (ALAN) website had no requests for specific relief equipment related to Sally, which had yet to make landfall. It still has 12 requests from Hurricane Laura.
ALAN coordinates disaster relief efforts between donors of goods and services and the logistics network needed to get those products and assistance into the hands of those who need them.
“In an ideal world we’d have plenty of time to focus all of our efforts on Hurricane Laura cleanup and recovery – and assisting with ongoing disasters like the West Coast fires and COVID-19,” Kathy Fulton, ALAN’s executive director, said in a statement released Monday. “But in the real world, disasters aren’t always willing to wait their turn. As a result, we’re officially activating for Hurricane Sally.”
The freight market has shown some reaction to the storm. For example, the inbound tender rejection index (ITRI) for Alabama climbed significantly to 12.44% on Saturday before falling back slightly to 11.68% Monday, according to data in SONAR. However, those numbers are some of the highest in the history of Alabama’s inbound tender rejection index and could reflect drivers not being willing to go into the area of the storm for fear of not being able to get out quickly or getting caught in flash flooding.
The largest impact on the supply chain so far is the closure of the ports of Mobile and New Orleans, in line with the Coast Guard’s declaration of Zulu status at the ports.
A statement from APM Terminals at the Port of Mobile, in direct line of the storm, said there will be no gate operations there Wednesday morning. The statement also said decisions on when operations might resume had not been made.
Several Louisiana ports also are closed, including New Orleans, Baton Rouge and Plaquemines. However, the storm is expected to track east of those areas.
But the closure of the Louisiana refineries is being seen as a factor in a somewhat surprising increase in the price of oil and petroleum products. It’s surprising because the shutdowns of output in the Gulf of Mexico as well as the number of refineries closed in anticipation of the storm is less than that of Hurricane Laura a few weeks ago, and yet the price increase is greater.
Various media reports had analysts citing other reasons for the increase, but even those were somewhat surprising given that two major monthly oil reports — that of the International Energy Agency and OPEC — were bearish on the prospects for an increase in oil demand in the foreseeable future. Yet West Texas Intermediate crude rose $1.02/barrel to $38.28, while ultra low sulfur diesel climbed 3.13 cts/gallon to $1.1381/g.
There will be losses in refined product output as a result of refinery closures and the shutdown of the New Orleans port, gateway to several refineries that line the Mississippi River. The 247,000 barrel/day Alliance refinery operated by Phillips 66 has been closed since late Sunday.
Reuters reported a shutdown of the Shell Norco refinery. Its capacity is 227,400 b/d. Meanwhile, S&P Global Platts reported that the Chevron refinery in Pascagoula, Mississippi, one of the two refineries closest to where Sally is likely to make landfall, continues to operate its 356,400 b/d facility. Platts also said the Shell Mobile refinery, much smaller at about 90,000 b/d, also continues to operate.
U.S. output of ultra low sulfur diesel in the week ended Sept. 4, the most recent report available, was reported by the Energy Information Administration as falling to 4.329 million b/d. That’s the lowest since mid-June and is likely to have declined as refining capacity to the west, in the Lake Charles area where Hurricane Laura came through, remains offline.
In other storm-related activity, FedEx has listed approximately 260 cities where it has suspended deliveries over the states of Florida, Alabama, Mississippi and New Orleans.
As FreightWaves reported Monday, Class I railroads has made preparations for Sally, with Norfolk Southern closing its Mobile yard.
As for the roads, the Alabama Department of Transportation late Tuesday afternoon was not reporting any significant road closures. However, beyond the tropical storm warnings in the Mobile area, flash flood watches were reported as far into the state as north of Birmingham.