Katrinas effects on shipping analyzed
Ports in Louisiana and Mississippi play a key role in the transport of products ranging from fuel oil to fresh fruit across the region and the nation, according to James Corbett, a University of Delaware marine transportation specialist.
Corbett, assistant professor of marine policy in the UD College of Marine Studies, and graduate student Chengfeng Wang, who is working on his doctorate in marine policy, have been analyzing how the hurricane's damages to New Orleans and several other major Gulf ports will affect the movement and cost of consumer goods on regional to national scales. Corbett provides the following early observations.
How important are the ports on the U.S. Gulf Coast to the nation's maritime commerce?
Ordinarily, over 500 million tons of cargo a year--that's nearly 20 percent of the total cargo tonnage in the United States, both foreign and domestic--moves through ports in Louisiana and Mississippi, which now have been seriously damaged by the hurricane. These ports ordinarily receive between 8,000 and 9,000 ship calls a year in foreign cargo commerce alone--those are ships carrying foreign cargo, both exports and imports, that have to go through U.S. customs.
How long will it take the ports in Louisiana and Mississippi to recover?
Ports represent one of three major elements to the transportation system working together to allow goods movement. First, the pathways must be open; Katrina affected waterways, roads and rail routes that make up the freight transportation network. Second, facilities are needed to transfer cargoes from one mode (ship, truck, train) to another, linking the supply chain. Third, energy and labor must be available to move and transfer cargoes among the modes. In the longer term, transportation delays and higher prices for goods movement may be driven by the limited energy and labor available in the region more than the first two elements.
Many transportation functions can be restored before fully restoring the infrastructure to its pre-storm conditions. In fact, this recovery of service has already begun. According to the U.S. Coast Guard, many of the affected ports and waterways in the region are already reopening, at first to restricted vessel traffic. For example, as of Sept. 5, part of the lower Mississippi River opened with draft restrictions and for transits in daylight hours only or with permission of the Captain of the Port (COTP) of New Orleans. By the end of this week, the waterway may be open to its normal draft of 45 feet.
Getting the region's ports back online and ready to accept ships and handle cargo will be a big job. But ports are used to quickly repairing storm damage, and maritime industries are among the most resilient and adaptable of all industries. Much of the waterway recovery, vessel salvage and major port functions may be returned in the next several weeks, with full repairs continuing over the coming months. However, the biggest problems may emerge where the land-side infrastructure has washed away, especially for the energy and agricultural sectors.
What are the major kinds of cargo that ordinarily move through these ports, and how will they likely be affected?
Most of the tonnage is bulk cargo such as liquid petroleum, grains, iron intermediates and agricultural fertilizers. If delays in moving these goods are extended, they could disrupt time-sensitive shipments of grains harvested in the U.S. Midwest or the winter positioning of oil for heating and transportation in America's heartland. Delayed deliveries may also limit some capacity and/or increase the price of inputs for U.S. steel mills that rely on the iron ore and other raw materials that are shipped through Gulf ports.
What U.S. regions will be impacted most from damages to New Orleans, Gulfport, Pascagoula and other major Gulf ports?
Within the Gulf region itself (including Texas, Alabama and Florida), the Louisiana ports move more cargo, both domestic and foreign, than the Mississippi ports, but some Mississippi ports are designated as important for military transportation. Approximately 45 percent of regional cargo tonnage may be disrupted by the loss of the Louisiana and Mississippi ports. Less affected neighboring ports can absorb some of these cargo volumes, but, in the near term at least, some cargoes will be diverted to other ports in the region, oil to Houston and other Texas ports and perhaps other products to Jacksonville, Fla., for example.
New Orleans serves as the gateway to the Mississippi River, which is the largest internal waterway in the United States in terms of tons of commerce moved. The Mississippi River connects to the heartland of North America, including the Ohio River states and Missouri/Illinois River states. The top-two cargoes that use this river system are bulk-farm products (such as grains) and petroleum; other primary cargoes include coal, crude materials (iron ore) and bulk chemicals. To the degree that these are imported, exported or trans-shipped through ports affected by Hurricane Katrina, there will be impacts up into the Ohio River states, including Pennsylvania, and the upper-Mississippi/Missouri/Illinois River states. The direct loss of the major waterborne gateways for international trade for grains, coal, oil and other raw materials could affect those states in ways different from states along the West or East coasts.
What effects on cargo transportation, delivery and cost should we anticipate?
Historic data suggests that shipments of grains and agricultural food products increase in the autumn months, so we may expect some effects such as increased prices for these exports and delays. The other cargoes are not as strongly seasonal in their shipping patterns. Transportation effects will be greatest on time-sensitive harvest shipments, such as grains from the Midwest and fertilizer for the next growing season, winter imports of fruits to the Southeast and oil products for heating and transportation, which typically are shipped over the coming autumn weeks in preparation for winter.
Other transportation effects may be increased use of alternate routes and modes--truck, rail, air--to move cargoes that would have gone through these ports and waterways. For example, barged grains may be diverted to Houston via the Gulf Intercoastal Water Way (GIWW) or diverted to the Northwest by rail (and truck); or the grains may be stored for later sale depending on storage capacity and crop. However, the maritime transportation system may be able to adapt with limited service depending on how grain cargoes are handled. For example, midstream transfer of grains is common in New Orleans and may not require dockside grain elevators. Similarly, petroleum imports and transfers may be rerouted to locations in the Northeast, where they are most needed in the winter months and where regional refining capacity may (or may not) be able to meet demand while the Gulf Coast refineries recover.
Specific cargoes impacted will include refrigerated containers of fruit carried by companies like Chiquita's Great White Fleet and Dole Foods. This could be important as we start the winter fruit season. Perhaps as much as 10-20 percent of refrigerated containers are positioned in Gulfport, Miss., and the current southeastern and northeastern logistics for these carriers depends greatly on containers at the affected ports. This could affect the price of bananas and winter fruits into the Southeast region most, and also in the Northeast region. However, this will likely be addressed by increased shipments to, Wilmington and other niche ports that specialize in these cargoes. Trucking fruit back to the Southeast will further aggravate the price of fruit for the Southeast.
All of these conditions may affect the price of transportation and goods movement, but they should not affect the consumer price of commodities or finished products as much as the possible price effect from energy constraints. Energy is used in transportation, but also in farming (fuel for the harvest), raw goods extraction, factory production, etc.
The loss of electricity and delays in the movement of fossil energy will limit refining capacity to produce gasoline and diesel fuel for transportation and farming, home heating oil and fuel oil for electric utilities that power industry and homes. Price effects from these energy factors are likely to be more noticeable in the consumer price than price effects directly from logistics problems.
To learn how to subscribe to UDaily, click here.