Hurricane Ida Disrupts Already Fragile 2021 Supply Chain

By Logan Wamsley

In a typical year, despite all of the tragedy a natural disaster such as a fire, flood, or hurricane can bring, there usually aren’t very many implications for the world at large. These often horrific events may be devastating for the population in that region, but a country on the other side of world typically doesn’t have to worry how the tragedy can affect them economically speaking.

2021 is different, and while the global supply chain would normally be stable enough to survive one or even two significant disruptions, this year has been a perfect storm of challenge after challenge. The electronics, healthcare, aerospace, and especially the automotive industry can only take so much. And this means that when another, new disruption occurs, it makes the repercussions far more drastic than would be otherwise.

One example of this is the impact of Hurricane Ida. After making landfall in Louisiana as a Category 4 hurricane on Sunday with winds up to 150 miles per hour, all of the main ports in the region, as well as the Port of New Orleans cargo operations and the Norfolk Southern terminals. Additionally, the Federal Motor Carrier Safety Administration issued an emergency declaration for Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas for trucks and drivers transporting emergency supplies, fuel, and people in the states. Thankfully, only one causality has been reported so far, compared to the nearly 2,000 people who died during Hurricane Katrina in 2005.

In almost any other environment these disruptions would be relatively minor, but this year they could be debilitating for a supply chain that was already particularly fragile.

“The supply was already terrible,” said Eric Byer, the president of the National Association of Chemical Distributors, a trade association representing 400 companies that make and sell raw materials used in a vast array of industries, including construction and pharmaceuticals. “Now, it’s going to be worse.”

John Logue, chief executive of The Royale Group, a company which manufactures and distributors chemicals near its headquarters in Wilmington, Delaware, expressed a similar sentiment. “Any hiccup in the supply chain right now just adds fuel to the disaster,” he said. “We are not manufacturing what we want to manufacture. We are manufacturing what we are able to manufacture.” His company relies heavily on raw material suppliers from China and India, and for weeks it had already been straining to complete an order for a pharmaceutical company. This new crisis only complicates the situation further.

Gasoline prices are also expected to rise further, compounding with inflation to create exponentially increasing shipping costs for suppliers and consumers. Refineries in Louisiana, Mississippi, Texas, and Alabama account for more than 45% of the nation’s capacity for refining crude oil into gasoline and other important products. So far, four refineries shut down due to Hurricane Ida — 24% of the Gulf Coast refining capacity — and over 90% of the offshore oil rigs in the Gulf of Mexico have been shut down.

“Based on overnight movement in the futures market, a 10-20 cent jump at the pump is not out of the question. Where gas prices go from here will depend on the extent of the damage and how long it will take for fuel production and transportation lines to return to normal,” said Mark Jenkins, spokesman of AAA.
With four months left until 2022, there’s little doubt this will be the last disruption of the year. Supply chains would do well to continue preparing for the worst that may be yet to come.