Steel markets brace for Hurricane Rita

Steel markets brace for Hurricane Rita

As Hurricane Rita approaches the Houston area, America’s fourth largest city and largest break bulk port, steel professionals are already contemplating its possible effects on steel markets. Hurricane Katrina’s impact on steel markets has been profound but Hurricane Rita has the potential to cause more damage and disruptions to steel businesses. Unlike New Orleans or the Mississippi coast, Houston is a significant center for steel consumption, manufacturing, processing, trading, and warehousing. Within the possible impact area, there are steel mills (e.g. Jindal Plate Mill, Ipsco Rolling Mill), mesh producers (e.g. Ivy Steel and Wire, Foundation Steel and Wire), rebar fabricators (e.g. Texas Cold Finished Steel and other CMC rebar fabricators), as well as numerous steel service centers, distributors, and major trading companies such as Ferrostaal and Thyssen. All businesses in Houston are now closed until at least Monday and some, depending on flooding and power outages, may remain closed for weeks. Approximately 1.8 million Houston residents have been ordered to evacuate and may experience significant problems returning to city after the hurricane passes. The Port of Houston is ranked sixth in the world and second in the US in terms of total tonnage. Most steel imports make its first entry point through numerous terminals at the port. Most of those terminals are now closed until earliest Monday. Already running at maximum capacity due to diverted shipments from New Orleans, the port will undoubtedly struggle to resume normal operations. This means long delays in deliveries of vital raw materials and semi-finished goods to their ultimate consignees. Another possible impact is energy shortages that the hurricane can generate in terms of damaged natural gas lines. Natural gas shortages could hinder electricity production. Steel producers are primarily using natural gas for integrated steelmaking and electricity for electric arc furnace steel making. A possible and significant energy surcharge is now rumored throughout the industry. Apart from Houston, Rita is also affecting Port of New Orleans and Mississippi River traffic. All river activity is suspended until Monday. Barge fleet and barge lines have begun operational suspension procedures due to the hurricane’s projected path. When vessel movements and stevedoring operations are resumed, vessels will be worked on based on prior scheduling and based on availability barge equipment.