The Economy

Critical U.S. Supply Line Is Disrupted

By Neil Irwin
Washington Post Staff Writer
Thursday, September 1, 2005

The effects of the monster storm that devastated the Gulf Coast spread through the nation's economy yesterday, disrupting shipping and rail networks and sending prices for lumber, coffee and other commodities soaring.

Hurricane Katrina is likely to drag down U.S. economic growth in the months ahead, analysts said, threatening what has been a robust expansion.

Katrina's economic effects may be more lasting than those that usually follow big storms, economists and businesspeople said yesterday, owing to the severity of the damage and the unique geography of the New Orleans region. The storm hit a chokepoint in the U.S. economy -- a concentration of ports, rail lines, barge traffic and major highways making up one of the nation's major trade hubs.

New Orleans is underwater, and its future is uncertain -- as is that of the $49 billion in goods, 60 percent of U.S. grain exports, and 26 percent of the nation's natural gas supply and crude oil that flow through nearby ports each year.

"The Mississippi River is the aorta of the American economy, and New Orleans is the access point to it," said Al DeLattre, a supply-chain specialist with consulting firm Accenture Ltd.

In an attempt to fend off disruptions to the nation's fuel supply resulting from the storm, President Bush yesterday moved to release at least 1 million barrels of oil from the Strategic Petroleum Reserve, a 700 million-barrel emergency stockpile. Oil prices fell slightly yesterday on the news.

Signs emerged yesterday of the havoc the storm wreaked on the companies and transportation lines that supply the nation, with dozens of firms disclosing the scope of damages at facilities near the Gulf of Mexico or simply stating they could not yet say what that scope might be.

Union Carbide Corp. officials could not even get to their chemicals plant in Hahnville, La., the firm said yesterday, and it will probably take weeks to resume operations there. Chiquita Brands International Inc. reported severe damage at the Gulfport, Miss., facility where it stores one-fourth of the bananas it imports from Central America.

Yellow Roadway Corp., one of the nation's largest trucking companies, has 20 trucking terminals in the area affected by the storm, some of which may have been destroyed, chief executive William D. Zollars said yesterday. With major bridges near New Orleans damaged, the company is routing trucks hours out of their way.

Rail carriers Norfolk Southern Corp., Union Pacific Corp. and Burlington Northern Santa Fe Corp. have all stopped freight traffic into the afflicted area. And shipping experts said it is hard to predict how long it will take the Port of New Orleans and other nearby ports to reopen, given that they may need to dredge new channels and make major repairs. Efforts to reach officials of the Port of New Orleans were unsuccessful yesterday.

"I don't think there is any historical precedent for an incident of this scale," said C. James Kruse, director of the Center for Ports and Waterways at the Texas Transportation Institute.

The damage might even be felt at the breakfast table. New Orleans warehouses hold about a quarter of the nation's raw coffee, 211 million pounds. Concerns that importers will have difficulty rerouting coffee shipments and that large amounts of inventory have been lost pushed the price of coffee for December delivery up to $1.01 a pound yesterday on the New York Board of Trade, an increase of more than 3 cents, after gains Monday and Tuesday.

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