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Freight recovery from Irma to last months, spike truck rates

Hurricane Irma tossed shipping containers like leaves in the Dutch territory of Sint Maarten.

Hurricane Irma’s arrival this weekend threatens to roil US supply chains and double truckload spot rates, with analysts and transport providers warning it could take up to six months to recover.

Transportation providers are still reeling from Hurricane Harvey, the Category 3 storm that hit the US Gulf Coast two weeks ago. Category 4 Irma is threatening to tighten road and rail capacity even further, bottleneck traffic into and out of the Southeast, send spot market rates surging, and damage critical infrastructure.

“To say that this is going to have huge impacts and it’s going to be a puzzle for supply chain managers, when everything from Memphis to Charlotte is going to be impacted from high winds and rains, is an understatement,” Mark Montague, industry pricing analyst for DAT Solutions, told JOC.com on Friday. “This is unprecedented.”

The ports of Miami and Everglades in Florida were closed Friday. The ports of Jacksonville and Savannah were still in operation Friday but scheduled to cease operations by Saturday. While preparations for gale force winds are being made at ports farther north in Charleston and Wilmington, North Carolina, there were no imminent closures as of Friday evening.

Should the storm make landfall in South Florida as a Category 4 storm, as expected, and then slowly diminish in size and scale as it moves northwest through the interior Southeast, then at the very least shippers can expect tight capacity and historically higher rates through January of next year, said Troy Cooper, chief operating officer at XPO Logistics, the third-largest US trucking company.

“You can never predict what’s going to happen,” Cooper told JOC.com on Friday. “But, I think it’s safe to say it will be very tight through the retail season. You’re going to see this continue into next year.”

The full scope of Irma’s impact on rates won’t be known until next week, but spot rates, largely inbound to areas within the storm’s path, are anticipated to jump as high as, if not higher than, they did during Harvey.

“You probably heard some rates like $5 per mile or that rates were tripling. Certainly some of those could be true. I heard some of those as well,” said Montague. “But overall, rates from say the Dallas-Fort Worth area into the Corpus Christi area were up maybe two times up to $4.55 a mile.”

And those are conservative forecasts. Should the storm not diminish as quickly before it reaches the Southeast’s major inland distribution centers of Atlanta; Greenville, South Carolina; and Charlotte, then Irma will threaten both the region’s primary corridors for commerce but also relief efforts, delaying any type recovery for months.

“The projections are tropical storm-type weather for even Charlotte, winds around 50 or 70 miles per hour,” said Cooper. And a storm knocking out inland networks isn’t unheard of. “Hurricane Matthew, if you remember last year in North Carolina, there was a lot of stuff inland, off the coast, knocked out in flooding.”

It could turn what was a regional disaster from Harvey into a national catastrophe.

During Harvey, Montague said, “The Southeast distribution centers led by Atlanta, but also including Greenville, South Carolina and Charlotte and Memphis were sending product westbound to feed Houston. Because of that diversion, they were shipping less into the Northeast, so that burden fell on Midwest distribution centers in Ohio and Chicago, Illinois.”

Two of the top US truckload carriers told JOC.com that resources, equipment, and drivers, were stretched to their limit on Friday. According to DAT Solutions, only two US states on Friday were reporting even a sizeable amount of trucking capacity: Arizona and Nebraska, and then only for refrigerated and van cargo. If Southeast logistics centers fall, it could deplete any reserved equipment and manpower nationwide. “Supply chain managers are going to have to get creative,” Montague said.

Although the expected direct hit on Florida will be devastating — particularly to Miami — the state isn’t home to many major freight distribution centers.

“The main supply chain designed to serve Florida the freight comes out of the Atlanta market. There is some warehousing in central Florida and Tampa and Jacksonville, but the primary place is Atlanta, secondary is Charlotte, tertiary is Nashville or Memphis,” said Montague. “If Atlanta gets hit at the tail end of this storm, that’s really bad news.”

There is not a single Florida city in the top 15 US distribution centers, ranked by freight volume. Jacksonville is the top distribution center in Florida and its port handled 2.26 percent of total US containerized imports and exports last year.

Florida is not a major supplier of goods to any part of the US outside of produce, and the peak shipping season for those goods is March through May. According to Montague, “There’s virtually nothing that comes out of Florida from July through September.”

So the major increase to rates will be for cargo moving into the Southeast. There will be a temporary pause in that traffic over the weekend, as ports shutter and mandatory evacuations in coastal regions east of Interstate 95 take effect. Immediately before and after the storm, however, there has been and will be a surge of cargo on the roads.

“When you think about getting on the road, most of those roads are impassable or in traffic,” Cooper said.

But according to Montague, “there will be truckers brave enough to go down there.”

Shippers are paying dearly for those drivers.

Contact Reynolds Hutchins at reynolds.hutchins@ihsmarkit.com and follow him on Twitter:

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