This report discusses hurricane Katrina, the extent of the damage, how soon normal port operations can resume, and which shippers in particular will have the hardest time adapting should the disruption continue for an extended period

Frittelli, John F.

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1 For more specific information on Hurricane Katrina’s affects on oil and gas supply, see CRSReport RS22233, Oil and Gas: Supply Issues After Katrina.  The Administration has alsotemporarily (until September 19th) waived the Jones Act for ships carrying petroleum products.The Jones Act (the 1920 Merchant Marine Act) restricts domestic waterborne transport to U.S.built, flagged, and crewed vessels.  The temporary waiver is intended to facilitate transport ofgasoline to the East Coast while pipelines are restored.Congressional Research Service The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS22257September 13, 2005Hurricane Katrina: Shipping DisruptionsJohn FrittelliSpecialist in TransportationResources, Science, and Industry DivisionSummaryHurricane Katrina damaged the nation’s leading gateway for the import and exportof many bulk materials.  In addition to oil and gas suppliers, grain producers and thesteel, chemical, and rubber industries are highly reliant on the ports along the LowerMississippi River.  While commercial shipping has been restored on a very limitedbasis, it is still uncertain when the region will be able to return to normal shippingoperations.  Obstacles to full operation include a lack of power, displaced port workers,missing channel buoys, and submerged debris in some ship channels.  With theexception of one Gulf port, most ports suffered only minor damage to their terminalequipment.  The extent of the damage, how soon normal port operations can resume, andwhich shippers in particular will have the hardest time adapting should the disruptioncontinue for an extended period are of significant interest to Congress because theseports potentially affect the trade of 33 states that depend on the Mississippi River andits tributaries for shipping.  IntroductionThe Port of New Orleans, and its neighbors just upriver (the Port of South Louisianaand the Port of Baton Rouge) are unique because they connect with the nation’s mostextensive and heavily used inland waterway system for the transport of bulk materials –the Mississippi River.  Oil and gas1, grain, steel, chemicals, and other primary productsare transferred between ships and barges at these three ports.  Damage caused byHurricane Katrina has temporarily disrupted operations at these ports.  The criticalquestions are: How long will shipping be disrupted?  What are the obstacles to resumingnormal operations?  Which economic sectors will be most affected if the disruption toshipping continues for an extended period.CRS-22 For the latest information on the condition of the ports mentioned in this report as well as allother ports in the central Gulf region, see [http://www.aapa-ports.org] and click on “HurricaneKatrina - Port Updates.”3 The NDRF is a fleet of militarily useful ships, usually used to support the U.S. Armed Forcesin time of war or national emergency.  This is the first time that these ships have been activatedto assist in recovery from a domestic disaster.Damage AssessmentsPorts.  Three of Louisiana’s ports on the lower Mississippi River rank in the top tenin terms of total tonnage handled at U.S. ports.  The Port of Baton Rouge and the Port ofSouth Louisiana (between Baton Rouge and New Orleans on the Mississippi River)suffered minimal structural damage.  Both ports report that their grain elevators and othercargo handling structures are intact.  Both ports are key to grain exporters and petroleumimporters.  The Port of South Louisiana also handles imported aluminum ores and exportsof lime, timber, sugar cane, cotton, rice, and resins.  The Port of Baton Rouge additionallyhandles forest products, steel products, chemicals, and molasses.  The Port of NewOrleans reports that while it has been damaged, the port is workable.  All four of itscontainer gantry cranes are intact but two are not operational because of damage toelectrical components.  Some warehouses have sections of roof missing but are useablewhile repairs are made. The port handles containerized freight, imported coffee, rubber,metals, cotton, and oil, among other commodities.   All three lower Mississippi River ports are currently handling ships carrying reliefsupplies.  The Port of New Orleans began limited commercial cargo handling on Monday,September 12th.  The port’s president is hoping that the port will be operating at 50% ofnormal operations by the end of the month and back to full operations within six months.The Port of Gulfport (Mississippi) suffered a direct hit from the hurricane and hasthe severest structural damage.  Gulfport is a leading gateway for containerized, importedfruit and vegetables from Latin America.    It will have to be completely rebuilt.  The ports of Mobile, Alabama and Pascagoula, Mississippi experienced somedamage to port buildings, but their infrastructure is basically intact.  The Port of Mobileexports forest products, imports iron ore, and transfers coal and petroleum products inboth directions.  The Port of Pascagoula handles steel, refrigerated meat, and woodproducts, among other commodities.2Power and Workers.  With the exception of Gulfport which took a direct hit fromthe hurricane, the greatest impediment to the other ports’ operations may be the lack ofpower and the fact that many of their workers are without housing.  The MaritimeAdministration has mobilized seven ships from the National Defense Reserve Fleet(NDRF) to assist the ports.3  Three of the ships will be used to provide temporary housingfor port and petroleum industry workers; one ship, already stationed in New Orleans, isbeing used as the headquarters for Port of New Orleans staff; and the remaining ships aredesigned to provide cargo handling capabilities in damaged ports.   Shipping Channels.  Up to the Port of Baton Rouge, the Mississippi River isdredged to accommodate ocean-going ships with a 48-foot draft.  Upriver from BatonCRS-34 For Coast Guard updates on channel conditions, see [http://www.uscgstormwatch.com] andclick on the “Port and Waterway Status” bar.5 Transportation Weekly, September 7, 2005, p.4.Rouge, the river accommodates barge transport with a 12-foot draft.  The downriverMississippi shipping channel is currently open to two-way traffic but restricted to vesselswith up to a 39-foot draft.  Reportedly, there may be over 100 vessels of varying typessubmerged in the river.  There are two unknown obstructions in the channel towards themouth of the river, which is the reason for the current limit on vessel draft of 39-feet.  Thechannel is open only during daylight hours because many of the channel signal buoys aremissing or displaced.  Ships normally transit the channel on a 24-hour basis.  The CoastGuard is in the process of replacing, repairing, or repositioning navigational aids on thechannels.  The Coast Guard, the Army Corps of Engineers, and the National Oceanic andAtmospheric Administration are surveying ship channels for potential shoaling andunderwater debris.  Until the channel surveying is complete and obstructions are removed,ships are proceeding at minimum speeds.  From Baton Rouge to New Orleans, theshipping channel extends about 172 miles.  From New Orleans to the Gulf of Mexico, thechannel is about 70 miles long. The channel to the Port of Mobile is only slightly limited as to draft, but nighttimetraffic is suspended because channel markings are not in place.  The Port of Pascagoulareports that it has experienced only minimal shoaling in its channel.4Truck Routes.  Key truck links to the ports in the region are damaged.  Interstate10 across Lake Pontchartrain is severely damaged as is the causeway across the lake.  InMississippi, bridges on I-10 and U.S. 90 are demolished. Railroads.  New Orleans is an important rail hub, because like other cities in themiddle of the country (Memphis, St. Louis, and Chicago) it is an interchange pointbetween the western and eastern rail networks.  All five major U.S. railroads (and oneCanadian owned railroad) have tracks running into New Orleans.  Therefore, NewOrleans is not merely an origin or destination point for rail cargo, but also an interchangepoint for east-west cargo passing through New Orleans.  Railroads with track coming intoNew Orleans from the West (Union Pacific, BNSF, and Kansas City Southern) and fromthe North (Canadian National) have reportedly suffered little damage.5  However,railroads with track coming from the east suffered considerable damage.  NorfolkSouthern has replaced its track on a bridge over Lake Ponchartrain (the bridge was notdamaged but the track was washed off the bridge by the hurricane) and one of its railyardsin New Orleans was flooded.  CSX suffered the most severe damage.  CSX lost track andbridges that run parallel to U.S. highway 90 along the Gulf Coast and its railyard in NewOrleans was flooded.  Due to the damage of track east of New Orleans, rail cargonormally interchanged in New Orleans is instead being interchanged in Memphis orBirmingham.      Implications for ShippingWhile the operations personnel  and logistics staff of carriers and shippers are closelymonitoring the situation, they are busy finding the next best alternative for cargo thatnormally would be routed through ports damaged by Hurricane Katrina.  Some types ofCRS-46 For further information on the hurricane’s impact on U.S. agriculture, see CRS ReportRL33075, U.S. Agriculture After Hurricane Katrina: Status and Issues.cargoes will be easier to reroute than others.  Bulk cargoes are more heavily dependenton the lower Mississippi River ports than other cargo types.  Bulk commodities areclosely tied to the lower Mississippi River ports because these ports are set up for bargeto ship transfer.  Non-bulk commodities, which more often move by rail and truck tomake port connections, can more easily find a feasible alternative because rail andhighway connections are common at most major ports, including neighboring ports in theGulf region.    Dry Bulk Cargo.  In addition to energy imports, much of the concern surroundingthe potential impacts of Hurricane Katrina on shipping centers on the export of bulk grain.Bulk grain exports are particularly dependent on the ports of South Louisiana, BatonRouge, and New Orleans.  These ports serve as the primary transfer point from barges toships for exported grains carried by barges down the Mississippi River from areas ofproduction in the Midwest.  If the Louisiana ports are not able to operate at full capacityin the coming weeks, some of this cargo may be diverted to other markets that do notutilize these ports.  For example, some product could be moved by rail from the UpperMidwest to ports in the Pacific Northwest, to Great Lakes ports, or ports on the East Coast– but at significantly greater cost.  A portion of the product could also move by rail toTexas Gulf ports or to Mexico and Canada.  Another possibility is that a greater portionof the product may be sold domestically at reduced prices.  However, it is improbable fora number of reasons that these alternatives would be able to absorb anything approachingthe volumes that would otherwise be handled by the Louisiana ports.  First, thesealternative routes are traditionally used mostly by farmers located farther from theMississippi River and its tributaries.  Second, while railroads are an alternative, they aremore costly than barges.  Railroads also do not have the capability to suddenly handle asubstantial amount of additional agricultural cargo.  For the large export shipment sizescarried by barges, trucking is not a practical alternative.  Limited alternatives for grainexporters may mean that the most attractive option in the short term is to hold theirproduct until further information on the ports’ availability is known.    Getting the ports and the river channel back into service quickly are critical for theexport of bulk grain.  The wheat harvest has already begun, but much of this product isshipped by rail to ports in the Pacific Northwest.  Normally at this time of year, grainelevators are shipping out the remainder of last year’s crop in order to empty theirelevators in anticipation of this year’s harvest.  Hurricane Katrina has delayed thisprocess.  The peak of the corn and soybean harvest begins in late September, so thepotential impact of Hurricane Katrina will depend on how quickly the ports and shipchannels on the lower Mississippi can return to a normal operating tempo.  The UpperMississippi River and St. Lawrence Seaway are closed to navigation in the winter.  If itis a matter of a few days before the ports are at full operating capacity, it may notsignificantly impact the grain markets, but if it is a matter of a few weeks, it will have asignificant impact.6In addition to grain products, other bulk cargoes heavily dependent on the lowerMississippi River ports are coal, chemicals, fertilizer, cement, scrap metal, and coffee.CRS-57 Figures on the economic impact of the Port of New Orleans are available at[http://www.portno.com].Container and Break-bulk Cargo.  Relative to bulk cargo, containerized andbreak-bulk cargo may more readily find alternative shipping routes.  Marine containerscarry a wide variety of goods, but imports tend to be dominated by consumer goods andmanufacturing parts.  A marine container is about the size of a truck semi-trailer.  Break-bulk is cargo that can not fit in a container, so it is handled on pallets, slings, or inindividual pieces.  Examples include steel products, rubber, construction materials, largemachinery, and forest products.  Because the Port of New Orleans is the closest to theGulf of Mexico of the three lower Mississippi ports, it is the preferred port for containersteamship lines.  Gulfport, Mississippi is also a container port that handles bananas andother perishable goods.  However, due to the relatively easier transferability of containersamong ship, rail, and truck modes, it is less problematic to find alternatives routes forcontainerized cargo.  In addition, container ships, and break-bulk ships to a lesser degree,tend to call at more than one port within a coastal region.  Therefore, the solution to a portclosure is usually to divert the cargo to the next closest port on the schedule (e.g. Houston,or a Florida port).  However, this option will add costs to the freight movement becauseit most likely entails a longer inland connection.ConclusionMississippi River commerce and the three southern Louisiana ports areinterdependent, as are the Port of New Orleans and the City of New Orleans.  A 2001study of the economic impact of the Port of New Orleans on the state of Louisianaamounted to 107,000 jobs and $13.4 billion in annual spending.7Port disruptions may include much higher shipping costs, as well as transportcapacity shortages in terms of grain exports.  The economic impact will depend on howquickly vessel traffic can resume.  Key factors appear to be how quickly the Coast Guardand Army Corps of Engineers can restore the shipping channels to full capacity and howquickly the ports can restore power and mobilize their workforce.  At the same time, porttraffic is likely to rapidly increase as New Orleans begins to rebuild.       

Hurricane Katrina: Shipping Disruptions

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Hurricane Katrina: Shipping Disruptions

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