Supply Chain Research

Hurricane Harvey, which has accelerated to a class three according to NOAA forecasts, is set to make landfall in Texas in the coming days. That would be the first hurricane to make landfall in Texas since Hurricane Ike in 2008, while the last category three to make U.S. landfall was Hurricane Wilma in October 2005. Super storm Sandy may prove to have been more severe, but was not technically a hurricane in terms of wind-speeds when it made landfall.

From a logistics perspective there are three likely impacts, with landfall predicted to be near the mid-Texas coast near the ports of Houston and Corpus Christi. Firstly, shipping itself will be disrupted due to the storm conditions. There may be diversions to other ports for containerized freight. That will depend on the second, which is temporary or permanent damage to port facilities. Third, consignees at or near the ports may also be damaged, reducing their ability to receive freight.

The largest area of disruption will likely be to energy shipments, including gasoline and crude oil. Panjiva data shows that Gulf Coast ports account for 74.9% of the east coast total imports of crude oil in the quarter to July 31. In turn Port Arthur, Houston and Corpus Christi (the three ports that appear closest to landfall) are responsible for 25.4%, 21.1% and 9.4% of gulf coast imports respectively.

Chart segments eastern seaboard U.S. crude oil imports by port and region. Source: Panjiva

Most of the large oil refiners are exposed to imports at those three ports. The largest is Valero (at 19.0% in the past year), followed by Exxon (13.3%) and Shell / Saudi Refining / Motiva (13.9% before their demerger). Temporary disruptions may simply require a delay in shipments, though more major disruptions may require repairs and declaration of force majeure on contracted volumes.

Chart segments crude oil imports to Port Arthur, Houston and Corpus Christi by refiner Source: Panjiva

Port Houston is also the fifth largest container port complex in the country by imports, so disruptions may be felt more broadly. It has also garnered a significant increase in the share of shipments coming to the U.S. from China and Europe, as outlined in Panjiva research of August 25. Containerized freight consignees from those locations may also therefore face outsized disruptions to their supply chains.

Chart segments inbound containerized traffic to ports in Houston by country of origin. Source: Panjiva