Freight transport nationally is being disrupted by Hurricane Harvey – and will be for a month or more – as the fierce storm leaves flooded and damaged roads, downed powerlines and other wreckage in its wake.
The storm also could leave a rise in long-term trucking contract prices in its wake, according to a report by analysts at FTR Transportation Intelligence.
Hurricane Harvey made landfall this past weekend near Houston, and now is lingering as a wet tropical storm expected to dump as much as three feet of rain in some areas over the coming week. It could “strongly affect” more than 10 percent of all U.S. trucking this week and 7 percent next week, the FTR report said.
After a month, the storm’s impact on trucking will have lessened considerably nationally, but, but the damage it leaves still is projected to hamper operations at about a quarter of the trucking operations in the affected Gulf Coast region.
Indiana-based FTR has studied the impact of severe weather on trucking since Hurricane Katrina wreaked havoc throughout the Gulf States in 2005.
In addition to delaying shipments and damaging equipment, impacts include “significant pricing effects” according to the report, which FTR classed as a preliminary assessment. These impacts included an average 7 percentage points hike in annualized pricing nationally for the five months following Katrina, and a 22 percent year-over-year increase in spot pricing following the severe winter storms of 2014.
Spot pricing for trucking services, especially in Texas and the central southern states, could jump as much as 5 percentage points in the next several weeks, said Nöel Perry, a partner at FTR.
Because Texas is home to about 30 percent of U.S. oil refining capacity – much of it centered around Houston – production of diesel fuel and other petroleum products is expected to be especially hard hit, according to the FTR analysis.
“We are talking about impacts to fuel and energy,” said Larry Goss, an analyst for FTR.
Houston also is a major intermodal shipping site and the storm may have persistent impact on rail shipments as well as on trucking, Gross said.
Severe weather impacts trucking in four principal ways, according to FTR:
- Idling trucks as they wait for water to recede from roads and loading docks;
- Prioritizing shipment of relief and emergency construction supplies over regular freight;
- Slowing overall operations due to congestion on roadways and in freight loading areas;
- Reducing productivity with out-of-cycle supply chain demands.
A longer-lasting impact of Harvey, said FTR’s Perry, could be increased long-term shipping contract rates.
The combination of regional and fuel effects from Harvey, coupled with the federal Electronic Logging Device mandate that takes effect in December, “could be the catalyst to a pricing spiral” for trucking contracts, he said.
While the storm has wreaked havoc with trucking, logistics, oil refining and other business across a wide path of the South, it might have created a selling opportunity for the recreational vehicle and temporary housing industry.
Following Hurricane Katrina, the Federal Emergency Management Agency spent $2.7 billion on roughly 145,000 trailers and mobile homes to those displaced by the storm.
“It is likely that FEMA will again purchase temporary housing for displaced residents and emergency personnel aiding in the relief efforts,” said analyst Michael Baudendistel of Stifel Financial Corp. But in a report to investors Monday, he said the number of displaced residents from Hurricane Harvey is probably smaller than Katrina and the need for temporary housing might be as low as 15,000 units.
Read Next: Sprouting Legal Marijuana Industry Needs Secure Weed Trucks