Uncertainty in supply chain as US storms close ports

By Davide Ghilotti, Yoke Wong
Published: Monday, 02 October 2017

Rail and sea links are fractured in the US's largest international port, as supply chains of some industrial minerals could be disrupted.

Most of the world watched in horror as images filtered through the news screens of the damage wreaked by Hurricane Harvey and Irma in September. 


As well as the tragic loss of life and the insurmountable damage to civilian homes and buildings, IM also discovered that many ports and railways had been shut in affected areas, disrupting the supply chain in many minerals markets.

In the days following Hurricane Harvey, heavy rains and flooding spread across the region surrounding Houston, disrupting mineral shipments in one of the world’s most important port regions.

The Port of Houston, the largest international port in the US, reopened on 1 September, but other ports in the region remained closed as IM went to press, alongside other infrastructure damage.

"The hurricane in the US has closed Port Arthur," one soda ash supplier told IM. "At the moment there’s no product coming out of the US."

"It’s not just a port it’s also the rail [network]," he noted. "The product comes down from Wyoming to Port Arthur by rail and that was the first thing to be impacted as it wasn’t safe. Then they closed the port."

But the supplier suggested the closures would be "a blip".

"Generally speaking, there will be inventories in the system which people will live off," he said.

Union Pacific this week announced the suspension of some services in the affected area, including "embargoes for all rail traffic destined to Gulf Coast locations and others within the Houston Service Unit".

BNSF has also suspended services to and from Houston. "With additional flooding likely during the next few days, normal train flows in the area may not resume for an extended period," BNSF said on its Facebook page on 28 August.

Barytes disruption

Some were concerned that the disruption to rail services would prevent the shipment of barytes into the Texas oilfields, suppressing one bright spot of demand in a muted market.

Although most Texan oil and gas activity is based within the Permian basin, well beyond the reach of the hurricane, oil rigs in the Gulf of Mexico were abandoned before the storm.

"The oil wells are shut. If the oil wells are damaged, they will need to be repaired before drilling; this could impact barytes demand," noted one Chinese producer, which exports large volumes to the US.

"The oilfield industry has been coming out of winter, but now this is like adding frost to snow," the producer said.

Alumina trihydrate

The area of the Gulf of Mexico is also a preferential route for imports of alumina trihydrate (ATH) into the US – the majority of which originates from Latin America.

Brazil, one of the main producers of ATH, has been steadily increasing its shipments to North America since early last year, when domestic US supply was sharply reduced by the closure of two major alumina refineries - Alcoa Inc.’s Point Comfort plant and Sherwin Alumina Co.’s plant, both in Texas.

Between January and April this year, Brazilian ATH deliveries to the US increased by almost 150% year-on-year (y-o-y).

Shipments of Brazilian ATH reach the US through Gulf ports, and are then distributed via barge or road transport to consuming facilities in the southern and western states.

IM received no confirmation of whether importing schedules were disrupted by the hurricane, although a number of sources reported closures of port facilities in the area.

Georgia

The port of Savannah in the US state of Georgia, closed for four days in the immediate aftermath of Hurricane Irma after the local government declared a state of emergency.

Operations resumed at 6am on 13 September following a facilities assessment.

"After the hurricane passes, we are committed to assessing any damage and getting our ports back up and running as quickly as possible," said port director Griff Lynch at the time. 

The port of Savannah is the main export route for many industrial minerals produced in Georgia, including kaolin, feldspar and iron oxide.

Despite the delay, a number of local producers were confident that the port will very quickly overcome the looming congestion and operations should normalise soon. 

Kaolin producer KaMin LLC told IM on 12 September that the company does not anticipate delivery delays in bulk shipments of paper-coating grade kaolin to its customers.

However, KaMin closely monitored the situation on container shipments with carriers, as some congestion delays were expected when the port reopens. 

Another kaolin producer told IM they expect a "three or four day delay" but anticipated the port "will catch up very quickly".  

Active Minerals International, supplier of high-quality gel grade attapulgite and air-floated kaolin resumed domestic and export shipments through the port of Savannah on 13 September 2017, the same day the company restarted production.  

Mosaic shuts phosphate mine

And in Florida, North American fertiliser producer the Mosaic Co. shut down its Florida operations, including its port and rail facilities, in preparation for hurricane Irma.     

"The Mosaic company plans to idle its Central Florida phosphate mines and partially idle its concentrate facilities, to facilitate efficient resumption of fertiliser production following the storm," the company said at the time. 

Mosaic’s supply chain partners in central Florida have also taken similar actions, resulting in more port and rail closures, which will interrupt the supply of raw materials, according to the company. 

"We are executing our hurricane preparedness plan and taking extensive precautionary measures to protect our employees and assets. We are also mindful of our customers’ concerns, and we encourage customers to stay in contact with their Mosaic sales representatives as the situation progresses," said CEO Joc O’Rourke.

Mosaic is one of the largest fertiliser producers globally, serving the international market.