Winter’s Fierce Bite to Cost Economy More than $3 Billion

Winter’s Fierce Bite to Cost Economy More than $3 Billion

The frigid winds of January, which brought snow, ice and unusually cold temperatures to a large swathe of the United States, could have a longer lasting chilling effect on the economy and overshadow the first quarter.

Four separate periods of severe winter weather in January directly cost the U.S. economy $3 billion, with insured losses exceeding $1.4 billion, according to Impact Forecasting, the catastrophe model development center of Aon Benfield, a reinsurance intermediary and capital advisor.

“The combination of physical damages and business interruption costs have quickly aggregated into direct economic losses well into the billions of dollars,” said Steven Bowen, senior scientist and meteorologist at Impact Forecasting.

The storms have been blamed in part for disruptions in manufacturing, drayage chassis shortages in the Northeast and at Midwestern rail terminals, slower freight trains in the West and trucking delays throughout the country.

Congestion again in Port of New York and New Jersey

Winter weather has slowed work at the Port of New York and New Jersey and inland rail ramps, and reduced turnover of equipment has tightened supplies of intermodal chassis.

New York-New Jersey container terminals have lost several days to storms in January and February, and icy conditions continue to slow operations.

Problems continued this week, when Maher Terminals closed Wednesday because of a snowstorm and other terminals operated on short schedules.

Maher said it would open Saturday from 7 a.m. to 5 p.m. Truck queues on streets outside the terminal stretched more than two miles Friday morning.

Snow and ice removal has been complicated by a regional shortage of rock salt that also has affected many cities and towns.

“It’s been a bloodbath”

For trucking and shippers that rely on over-the-road transport, “it’s been a bloodbath,” said Satish Jindel, president of SJ Consulting Group, Pittsburgh. “Having talked to more than half a dozen private companies, it’s been brutal.”

Not only were costs up and revenues down in January, but trucks were stranded, and driver wages rose, he said. The extreme cold and snow increased truck maintenance costs, as well, Jindel pointed out, and clearing snow from terminal facilities isn’t cheap either. “Like the public sector, many companies are running out of money for that.”

He expects those weather-related costs from January — and potentially February — to put first quarter profits at many companies in a deep freeze. There may be a rebound, however, when warmer weather thaws supply chains and consumers shovel their way back to retail outlets to release some pent-up spending.

Many stores and retail outlets have been closed for extended periods or multiple times by severe storms, said Andy Moses, senior vice president of global products at Penske Logistics. “There have been real disruptions in supply chains because of these events,” Moses said. At times, “you had distribution centers where two-thirds of the workforce didn’t show up because they couldn’t get to work.”

Weather buoys truck freight spot rates

The extreme weather affected the truck freight spot market and freight rates as well, boosting rates in heavily affected areas while rates were stable or dropped in others.

The DAT national average rate for dry vans stayed atypically high at $1.94 per mile in the week ending Feb. 1. That may be a sign shippers were struggling to find ways to move freight outside normal channels and around weather-related bottlenecks. Spot market loads were up 5.9 percent in the last week of January, DAT said.

“The weather has been driving a lot of spot market freight activity, with many loads were cancelled and re-scheduled,” DAT pricing analyst Mark Montague said in a Jan. 28 blog post.

In Atlanta, following a snow storm that paralyzed the city, spot rates were up 3 cents on average in the week ending Feb. 1, matching the national average of $1.94 per mile. Rates were up 5 cents in Charlotte, N.C. Spot van rates out of Buffalo, N.Y., were up 22 cents per mile over the previous week, DAT said.

Nationwide, spot dry van rates were up on average 22 cents last month compared with January 2013 — a 13 percent increase year-over-year. “It’s not normal for the weather to disrupt freight movements to such an extent, week after week,” Montague said. “This whole ‘polar vortex’ could really curtail GDP growth in the first quarter.”

Contact William B. Cassidy at wcassidy@joc.com and follow him at www.twitter.com/wbcassidy_joc. Senior editor Joe Bonney contributed to this article; contact him at jbonney@joc.com and follow him at twitter.com/JosephBonney.