August 25, 2017

Supply chain braces for disruptions as Harvey roars toward Texas Gulf

UPS suspends pick-ups, deliveries in large swath of Texas, Louisiana; UP curtails train service; ALAN readies support.

By DC Velocity Staff

Logistics stakeholders braced late today for the fiercest hurricane to hit the U.S. in 12 years as Harvey, upgraded to a "Category 3" storm and packing winds that may reach 125 mph, bears down on the Texas Gulf Coast.

The storm, which is tracking to make a direct hit around Corpus Christi, is expected to remain in place for several days. It is projected to dump more than 30 inches of rain in some places, and produce record and life-threatening flooding. Damage is being estimated at around $40 billion if the storm maintains its current intensity when it makes landfall, which is expected later Friday or early Saturday. That would make Harvey the third costliest hurricane in American history, behind Katrina in August 2005 and Sandy in October 2012.

Hurricane Wilma is believed to be the strongest hurricane to ever hit the U.S., reaching top winds of 183 mph in October 2005.

Atlanta-based UPS Inc. suspended pick-up and delivery operations in multiple zip codes throughout the southern tier of Texas and four in neighboring Louisiana, including parts of New Orleans. Memphis-based rival FedEx Corp. issued a statement on its web site that it was monitoring the storm but didn't provide details on service disruptions, if any.

The ports of Houston, Galveston, and Corpus Christi have ceased operations for the duration. Port of Houston Executive Director Roger Guenther told CNBC this afternoon that it may take a few days for the Houston Ship Channel to reopen once the storm passes.

Omaha-based rail giant Union Pacific Corp., whose network feeds directly into the affected areas, began last night to curtail train operations there, it said. UP has also begun moving rail cars in yards prone to flooding to higher elevations. BNSF Railway, the other big western railroad, didn't respond to a request for comment at press time.

The American Logistics Aid Network (ALAN), a nonprofit group that connects providers of logistics and supply chain management resources with groups helping disaster-recovery efforts, said in its latest communiqué today that it has not yet received requests for logistics support. However, ALAN anticipates "additional not yet identified needs for warehouse space, transportation, and material handling equipment," Kathy Fulton, ALAN's executive director, said in the communiqué. Such requests may take several days to a week to surface as damage assessments are completed and local resources are exhausted, she said.

The Warehousing Education and Research Council (WERC), which works closely with ALAN to coordinate logistics support activities during emergencies, said in a statement late today that it will share requests from groups on the ground via its weekly newsletters and over social media outlets.

Oil prices rose today as traders priced in supply reductions as Harvey forced companies to shutter operations. Several oil companies had already shut down production from several facilities and had evacuated personnel from offshore platforms.

West Texas Intermediate (WTI) crude oil priced for October delivery rose today by 43 cents a barrel from yesterday to $47.86 a barrel. The Gulf of Mexico accounts for nearly 20 percent of total U.S. crude oil production, and the Texas Gulf Coast is home to nearly one-third of U.S. refining capacity, according to estimates from the Energy Information Administration (EIA), a unit of the Department of Energy. Gasoline prices are expected to spike this weekend in certain areas of the Southeast and in the mid-Atlantic.

On-highway diesel fuel prices averaged $2.59 a gallon nationwide in the latest EIA weekly data, which was published last Monday. Diesel prices will next be adjusted after the close of trading Aug. 28.

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