Storms' Aftermath Disrupts Supply Chain

The disruptions caused by the hurricanes will affect the trucking and transportation industry “for weeks and months,” Kent told Talking Business & Politics.

The initial impact of the storm will be exaggerated by the response, said Jim Craig, executive vice president, chief commercial officer for USA Truck and president for USAT Logistics. “Thousands of trucks are needed to move relief and rebuilding supplies into the storm-affected areas. With the market equilibrium being fairly balanced right before the storms hit, even a few percentage points of demand can dramatically impact the market dynamics.”

Demand for inbound freight to Texas and Florida is outpacing outward demand, leaving carriers searching hundreds of miles for revenue opportunities to fill unloaded trucks.

The two hurricanes caused multiple shifts in freight routes. As Harvey hit, distribution centers in the Southeast shifted freight to the South Central region as Houston shipping shut down.

As Peggy Dorf, market analyst at DAT, writes, “Then Irma headed toward Florida, and those same Southeast hubs refocused and moved freight south instead of west. Meanwhile, the Midwest had to supply the Northeast, to compensate for all the freight that would ordinarily arrive from Atlanta. And the midwestern warehouses were also called on to supply Colorado, which is often served by Houston.”

“So it’s not so surprising that rates went a little crazy last week, in between the two megastorms,” added Dorf. “The pressure intensified even more because it was a short work week following Labor Day.”

Diesel prices jumped 15.3 cents to $2.758 per gallon in the week of Aug. 28 to Sept. 4 following Hurricane Harvey. Analysts at Fleet Advantage told Logistics Management that refineries operating under capacity will likely increase fuel prices.

“Capacity and volume demand drive price, and volume demand and capacity will likely become unbalanced,” Fleet Advantage said. “We can expect prices to increase not only on fuel but also on supplies and materials. Production will be affected negatively, and other production resources outside of the disaster areas will have to fill in behind the damaged plants.”