With operations suspended through Wednesday for many areas, and longer for others, analysts have estimated that freight rates will spike as cargo transport will be affected for up to the next month.
Intense flooding from Hurricane Harvey continues to suspend industry operations in Houston and surrounding areas.
The effects of Hurricane Harvey continue to delay industry operations in the Gulf.
The Port of Houston remains closed Tuesday as port authorities monitor the inclement weather. Maersk Line has updated it list of vessels impacted by the storm, adding three ships to Monday’s list. The vessels affected now include the MSC Sao Paulo on the TP18 service and the SL Illinois and MSC Stella, both on the TA6 service.
The vessel Maersk Ohio (TA1) from Monday’s announcement will be omitting Houston and discharging imports at Freeport, Bahamas to connect to the MECL service. The Maersk Denver (MECL) will be induced to Freeport for the TA1 cargo and estimates a Houston arrival on September 2, said Maersk. Meanwhile, the additional three vessels have delayed Houston arrivals for later this week, pending terminal opening.
The Port of Corpus Christi is closed Tuesday as well, with the port authority aiming for normal operations to resume by September 4. The port stated that the U.S. Coast Guard and the U.S. Army Corps of Engineers continue to expedite channel surveys, but “current weather related to the remains of Hurricane Harvey is causing challenges to the survey operations.
The Port of Galveston issued an updated on Monday afternoon stating that ship channels will remain closed for the next 48 hours per the U.S. Coast Guard. The Port of New Orleans is not experiencing any inclement weather at this time and continues to accept cargo and vessels as they are rerouted to the port.
BNSF Railroad has experienced multiple washouts and high water on main lines in the area. As a result, all traffic destined to and originating from Houston has been suspended. Other area rail lines, including those with BNSF trackage rights, have also been forced out of service, said the rail line.
Furthermore, all operations at BNSF Houston-area railyards and facilities, including the Pearland Intermodal and Automotive facilities, are suspended as major interstate highways are closed. The rail line stated that crews will conduct an aerial assessment on Tuesday, weather permitting, to determine the current extent of damage and flooding impacts to the main lines.
However, “with additional flooding likely during the next few days, normal train flows in the area may not resume for an extended period. Customers should expect continued delays on shipments scheduled to move through the area,” said BNSF.
Union Pacific Railroad has also suspended rail operations along the Texas Gulf Coast from Brownsville through Corpus Christi to Houston and east to Lake Charles, Louisiana, said the rail line. It has implemented embargoes for all rail traffic destined to Gulf Coast locations and within the Houston Service Unit. The rail line “recommends customers consider diverting cars destined to the impacted area where feasible.”
According to the Wall Street Journal, “shipping costs will likely rise across a wide area far from Houston, based on the market’s response to previous natural disasters. In the meantime, freight operators say they expect an onslaught of demand, both from relief supplies and commercial freight that’s been held back, once waters recede and shipping channels and roads are cleared for traffic.”
FTR Transportation Intelligence firm has analyzed the impact of the hurricane, estimating that 7 percent or more of U.S. trucking will be strongly affected and/or out of operation for the next two weeks. “During the first week, almost 10 percent of all U.S. trucking will be affected. That number jumps near 100 percent for the Gulf Coast region west of the Mississippi,” said FTR. “After a month, the numbers fall but are still significant – impacting nearly 2 percent (national) and 25 percent (regional).”
Noël Perry, partner at FTR, said to “look for spot prices to jump over the next several weeks with very strong effects in Texas and the South Central region. Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.
“There is always a lag between spot rate increases and contract rates,” said Perry. “Analysts have been wondering when trucking contract rates will begin following spot rates up. The combination of regional and fuel effects from Harvey, coupled with the Electronic Logging Device (ELD) mandate in December, could be the catalyst to a pricing spiral.”