The Texas winter storms and in other parts of the South are causing logistics delays and disruptions that will linger as temperatures warm up and the recovery and cleanup begins. Part of the recovery is filling up those empty shelves and stressing demand for capacity where we will see spikes in shipper and carrier activities to get deliveries in and out of the region. Regional effects on transportation and logistics will echo nationwide and such large disruption impacts the balance of capacity carriers who are looking to avoid going through the hard- hit areas. Carriers with capacity in the heavily affected areas had to shut down and large portions of fleets were not available. The capacity shortage now creates a restriction nationwide which contributes to an increase in spot activity and rising spot rates. “There is an upward pressure on contract rates now”, stressed by the director of business intelligence from an Austin based freight broker that does business nationwide.
With the supply chains already highly impacted by Covid-19 and now with the storms, power outages and infrastructure damage affecting capacity, markets will experience surges and spiking demands while carriers are working on removing backlogs. Delays and closures at the border, late shipments and postponements are taking 2-3 days a week now instead of less than a day in Laredo, Texas. Trucks move slowly and schedules are behind caused by the temporary breakdown in infrastructure and power outages. It will take time for schedules to return to normal.
Logistics delays and disruptions will continue in the Southern states while they dig themselves out of the winter storm and just before these winter storms, gasoline prices were falling but now it is difficult for supply to keep up with demand. Texas refineries occupy about 20% of the country’s capacity and the winter storm is a big hit in gasoline production as the frigid cold have 12 refineries go offline. The outdoor refineries are not ready for exposure to sub-zero temperatures and although it is not difficult for refineries to come back online after a winter storm, gas prices are expected to rise. We are already seeing a hike in gas prices in California.
The country is now experiencing an aggressive disruption that is currently hitting the heart of the nation.