Detoured

The disastrous impact of Hurricane Katrina in New Orleans and other areas of the Gulf Coast has created a tremendous amount of uncertainty for many companies.

For the scrap recycling industry, while concerns about the loss of life were first and foremost, after the early, stunning pictures, many companies began wondering how long the region will be inaccessible and what the short- and longer-term affects will be.

The effect the hurricane and its aftermath might have on some of the large processors or consumers of various recyclables remains to be seen. A significant number of facilities that consume various types of recyclables—paper and paperboard, plastics, ferrous and nonferrous metals—are located in the general area affected by Hurricane Katrina. However, based on initial reports, it appears that most of these facilities were able to avoid much property damage. Many of these affected facilities are either operating at full capacity or are expected to be operational very soon as of press time.

Generation of traditional scrap supply, whether paper or metals, will likely see a drop, at least in the short term. With parts of New Orleans uninhabitable during September, it may be some time before there is enough of a recovery to feed many consumers who take in clean industrial, commercial and residential material from this region. In the short term, that supply, which according to a number of scrap processors was considerable, is gone.

Conversely, storm debris clean-up is generating large amounts of obsolete material that is beginning to flow into scrap yards.

But processors in the hard-hit area are also feeling the impact of the storm. The Institute of Scrap Recycling Industries Inc., (ISRI) Washington, initially reported that perhaps eight or nine member companies were directly damaged by the hurricane. However, dozens of smaller recycling operations have likely also sustained damage.

How the hurricane has affected the transportation industry is also a question that must be asked, as it appears to be a wild card determining the overall impact the natural disaster will have on the scrap recycling industry. While service is gradually recovering, any prolonged delay in repairs to the transportation infrastructure could send ripples throughout the country.

Although geographically the region directly affected makes up only a small part of the continental United States, the Mississippi River is a major artery for shippers. Scrap steel, as well as finished steel, grain and other commodities, have used the Port of New Orleans as either a jumping-off point for offshore shipments or as an importation spot. However, the flooding after the hurricane resulted in a sharp slowdown in the barge traffic operating out of the port. This adds to the level of uncertainty many in the recycling industry are facing.

RETURNING TO ORDER. Sustaining port traffic in the area is one of the biggest concerns. The Port of New Orleans has been one of the busiest ports for importing steel into the United States. The halt of the port for even a short period of time has sent some tremors through the ferrous metals industry.

The port of New Orleans handles roughly 6,000 sea-going vessels per year. The materials delivered to the port wind through roughly 14,500 miles of inland waterways servicing the South and Midwest. In total, the Port of New Orleans handled around 31.4 million tons of cargo last year, a 5 percent increase from the previous year.

Already, some forecasts indicate that the price of steel used to make automobiles could increase by as much as 20 percent in light of possible raw material shortages. This possible increase in steel raw material costs would follow on the heels of significant surcharges several steel companies passed earlier this summer in anticipation of raw material shortages.

The jump in steel pricing could be caused by shortages of steel and the raw materials used to make it, including liquid hydrogen, a key ingredient to make of some types of steel. A New Orleans plant operated by
Air Products and Chemicals is one of two major domestic suppliers of liquid hydrogen and may not return to full production until late this year.

Many parts of the transportation industry, especially the trucking industry, have been hit hard by soaring fuel prices. Further price hikes because of even a temporary curtailment of oil into the nation’s supply could result in much higher prices for the products, whether they are the raw materials or finished products.

On the positive side, recent reports have the Port of New Orleans slowly returning to normal. While still far from operating at full capacity, the most recent indicators have the port getting closer to regular operations.

While the port sustained damage, Gary LaGrange, the Port of New Orleans’ chief executive, notes that the damage could have been much worse. He says he expects the port to be fully operational much faster than originally thought.

Reflecting an upbeat mood, LaGrange says the port made its first shipment of steel coils via barge in the middle of September following the hurricane. This shipment went to an Alabama auto manufacturer. Coastal Cargo Co. was scheduled to load the 4,500 tons of steel coils onto a barge Sept. 12.

The port also announced that later that same week, Coastal Cargo was expected to unload around 21,000 tons of cold rolled steel.

On the downside, the Port of New Orleans reports that as of the middle of September, only two of the port’s 27 terminals were open for business. Operations at the port were expected to be just 10 percent to 20 percent of the normal pace that week.

While the port continues to repair damaged equipment, reports say it will likely operate at around 50 percent capacity by early October and at up to 85 percent by the end of 2005.

As of mid-September, the Mississippi River was open during daylight hours only to vessels with a draft of 41 feet.

Other ports that have been hit by Hurricane Katrina include the Port of Pascagoula in Mississippi and the Port of Mobile, Ala.

Debris was expected to be cleaned up by the first half of September at the Port of Pascagoula. Temporary office buildings, telephones and electricity were expected to be connected by the first half of September.

The Port of Mobile was accepting 43-foot drafts, having returned to two-way, 24-hour vessel movement as of mid-September. The port estimates that it will be at least early to mid-October before a full depth restoration will be completed.

RAIL REDIRECTS. An estimated 100 freight trains per day serve New Orleans. At this location many of the eastern rail lines will deliver shipments and exchange traffic with western railroads such as the Union Pacific.

A number of rail lines—short lines and Class I railroads—were negatively affected by Hurricane Katrina. Some Norfolk Southern (NS) rail yards were damaged in the New Orleans area, though traffic backups should be short lived. No long-term problems with rail shipment are expected.

In the short term, tracks and bridges for NS and CSX lines appear to have sustained damage. Several sources say that the eastern bank of the Mississippi River was where most of the problems occurred, while rail property on the western side of the river sustained far less damage.

According to published reports, trains were stopped as far as 400 miles from New Orleans on CSX’s lines and up to 200 miles outside of the city on NS lines.

According to a spokesperson for CSX, one of the harder-hit railroads, some of its bridges were adversely affected by Hurricane Katrina and by flooding in the area around New Orleans. While the railroad has been able to give a fairly good assessment of its various yards, at press time it was still too early to definitively state what needs to be done.

Several other rail lines, most notably Union Pacific and Burlington Northern, were less affected by the hurricane because of the location of some of their bridges.

However, in the short term, shipments that typically ran through New Orleans are being detoured as far as 900 miles away, according to reports. This will further delay the movement of rail cars, something that rail lines have long struggled with throughout the past several years.

The author is Internet and senior editor of Recycling Today and can be reached at dsandoval@gie.net.