Hurricane Hits U.S. Economy, Not Just Houston

Written by Tim Triplett

“Hurricane Harvey was an incredibly expensive, economy-changing event. The impact will be staggering,” said economist Chris Kuehl of Armada Corporate Intelligence, speaking at Steel Market Update’s Steel Summit Conference this week in Atlanta.

Perhaps 10 percent of Houston’s population could be permanently displaced, creating a future labor shortage. “Companies may not get those workers back,” he said.

About 47 percent of U.S. refinery capacity has been affected by the floodwaters. Gasoline prices are likely to rise by 20-80 cents, at least temporarily, he estimated.

The cost of recovery will reach into the tens of billions. “It will be a major economic event for an extended period of time,” he added, at a delicate time in Washington when sensitive talks about the debt ceiling and other funding issues are currently under debate.

Macroeconomic Advisers, another forecasting firm, reports that the economic impact of the storm could cut 0.3 to 1.2 percentage points off the 3 percent U.S. economic growth expected in third quarter.

Speaking at SMU’s conference, analyst John Anton of IHS Markit said the market fundamentals point to marginally declining steel prices. While he did not change his forecast, he did alter the timing. “Think of all the OCTG and line pipe in Houston that is now under water and will have to be trashed,” he said. That will lower the supply while the recovery process raises demand. Thus, he does not expect steel prices to start their decline in the second half as he originally predicted.

Delays at the Port of Houston, which is responsible for more than 30 percent of all steel imports, could limit import shipments, giving temporary support to steel prices and an advantage to domestic suppliers, say other analysts.

Zekelman Industries is among many companies in the steel industry that have reached out to assist the victims of Hurricane Harvey. The company has pledged that for every dollar its employees, suppliers and customers contribute, Zekelman Industries will match that amount, up to a total of $250,000. Those considering a donation to the Red Cross to help with the relief efforts can click here to trigger a match from Zekelman.

Steel Market Update is among the contributors with a $5,000 donation.

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