By Richard Wall
Say you're an independent trucker in Kalamazoo, Mich., with the choice of taking a load of drywall to Louisiana for $1,400 or a load of siding to Atlanta for $800. Which load do you take? The obvious answer provides insight into how rebuilding efforts in the Gulf Coast are likely to affect the movement of building materials over the long term.
The Gulf Coast region itself faces immediate short-term logistical issues:
- All ports are open, including the Port of New Orleans. It's up and limping along, hampered in its movement of cement and plywood (along with other non-building supplies) more by a lack of employees on the job than by physical damages. Trucks face local road challenges getting to and from the port.
- Barge traffic is moving along the Mississippi unimpeded.
- Interstate 10 is open, thanks to bridge repairs moving ahead of projections. There are delays, however.
- All railways are open, except one CSX line from Pascagoula, Miss., to New Orleans.
- But U.S. Highway 90, the East-West artery serving the Gulf Coast region from Alabama to New Orleans, remains closed. Major repairs could take some time to reopen the complete 4-lane highway, with an earlier target of opening one lane in each direction.
- Double its size since just before Hurricane Katrina, Baton Rouge is so clogged with traffic due to New Orleans' evacuees moving there that building-supply trucks are reduced to making two runs a day. Four were the norm before the storm.
These issues will continue to affect the movement of building materials locally. The storms' larger effect on building materials logistics presents a classic example of supply and demand.
Disaster Drives the Market
"Natural disasters create a different marketplace for expedited services due to immediate need," says Tom Malloy, vice president of the Intermodal Association of North America, which focuses on transportation of materials by combinations of ship, rail and truck. "All of a sudden there's a highly focused intensity to move goods. Some motor carriers will dedicate a certain amount of their capacity to their relationship with FEMA or to the state of Louisiana or to some other recovery-related entity."
For example, Landstar Systems Transportation Co., based in Jacksonville, Fla., has agreed to increase its emergency transportation assistance to the federal government's Katrina relief efforts to as much as $400 million for 2005. An estimated $160 million in services is already under contract. That reduces capacity available to the open market.
Over the next months and years, FEMA will be assembling building materials in the disaster area, possibly in closed military bases, which already have rail lines and warehouses. The resulting boost in demand will likely necessitate paying for expedited services. That hypothetical Kalamazoo trucker will see a nice bonus tacked onto the load of drywall FEMA needs in Louisiana.
To make matters worse, the pool of truck drivers is shrinking at a time when even more are needed; the American Trucking Association reported in May 2005 that with a shortfall of 20,000 drivers this year, the supply of qualified long-haul drivers is the tightest it has been in two decades.
"FEMA and others will be taking available trucks to move materials into that area," says Robin Green, vice president of purchasing for Stock Building Supply. "Even before the hurricanes, transportation of building materials was difficult, with rail lines running at capacity for years, a shortage of rail cars, and not enough qualified truck drivers."
This comes on top of the effect of higher fuel prices, which is causing suppliers and builders to buy now before adjusted fuel surcharges increase costs even more. "We're trying to figure out what to do about this," says Robin. "Transportation in North America is having a serious impact on the building supply industry. We'll see higher prices and tighter availability."
Richard Wall is a freelance writer and editor living in St. Augustine, Florida.
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