Media & Marketing and Transportation, Distribution & Logistics

Storm's local impact mixed: Katrina's aftermath will take toll on business, but rebuilding efforts might offer opportunities

September 5, 2005

Hurricane Katrina will be both a curse and a blessing to Indiana companies, which will cope with higher fuel costs and shipping problems but find themselves awash in opportunities to sell materials and machinery for rebuilding Gulf cities.

Besides weathering the immediate impact of higher fuel prices, Hoosier firms will pay more for a range of goods, because of the trickle-down effect of higher shipping costs.

"Our biggest concern continues to be on the ever-increasing cost of fuel. That's s o m e t h i n g that gets passed along to our customers, who pass it along to the consumer," said Craig Coven, spokesman for Indianapolis-based Celadon Group, the largest international trucking carrier in North America.

The hurricane mayhem may force Hoosier firms that ship products down the Mississippi River through New Orleans- home to six of the top 15 tonnage ports in the nation-to find new ways to get goods to market.

Contact has been lost with a number of ports in the New Orleans area, where barge cargo connects with ocean vessels, said Jody Peacock, spokesman for Ports of Indiana. Even if New Orleans ports were functional, he said, "there are no people in New Orleans able to operate them."

"There is tremendous implications on Indiana's waterborne shipping trade," Peacock said.

Indiana companies ship 71 million tons of cargo annually by water. The products move through Burns Harbor on Lake Michigan and two Ohio River ports, Clark Maritime Center in Jeffersonville and Southwind Maritime Center in Mount Vernon.

While port officials don't yet know the extent of the disruption, they're exploring alternatives to New Orleans. One idea is to transfer goods in Baton Rouge and use coastal waterways.

Another solution might be to use Burns Harbor as the "New Orleans of the north," Peacock said, connecting to the Mississippi River via the Illinois River and Lake Michigan. While that route wouldn't accommodate larger ships, it would provide a gateway to the Atlantic Ocean.

Hoosier companies also are coping with losing sales outlets in the Gulf area.

"We have dealers who have literally been blown off the map," said Jeff Cosgrove, an officer of Indianapolis-based Sonny Scaffolds, one of the nation's largest manufacturers of interior scaffolds and drywall carts.

"We'll work with our dealers down there to get equipment in as soon as possible. First we need to find out if we have dealers there who survived this. We're really concerned about that first and foremost.''

Eventually, Sonny Scaffolds is likely to benefit from the rebuilding of New Orleans and cities in Mississippi. "In some ways it's unfortunate we get to profit from it," Cosgrove said. The firm plans to donate equipment to charitable groups, such as Habitat for Humanity.

Also likely to help in the rebuilding is Franklin-based Grimmer Industries, which makes gas and air compressors-including one with the unfortunate product name "Hurricane."

Offshore oil rigs frequently use the compressors for sandblasting in preparation for painting or other repairs, said company principal John Grimmer II.

"We don't know how many of our compressors are sitting at the bottom of the Gulf of Mexico right now, but we know there are some," said Grimmer President Tim Hollingsworth. "We are probably going to have to hurry up some production."

Until oil and natural gas rigs ramp back up, Indiana manufacturers are going to experience sharply higher production costs.

News reports say natural gas production has declined 85 percent in the Gulf of Mexico because of the hurricane. Natural gas futures on the New York Mercantile Exchange closed Aug. 26 at $9.792. They spiked Aug. 30 at a record high $12.30, according to ProLiance Energy LLC, an Indianapolis-based gas marketing firm that serves customers in 18 states.

Utility companies and other customers that bought gas at locked-in prices before the hurricane are in better shape. Unfortunately, many customers didn't because they thought prices would fall, said Dave Pentzien, director of marketing at ProLiance.

Perhaps the poster child for the hurricane's good-bad impact on Indiana is the Indianapolis Public Transportation Corp., also known as IndyGo.

The city's bus system last year budgeted $1.40 a gallon for its 2005 diesel fuel needs, but prices now average about $2 a gallon. Largely because of higher fuel costs, the transit line is asking city officials for permission to tap the bus company's credit for $3.74 million to plug the budget gap.

At the same time, the soaring gasoline prices courtesy of Katrina may have given IndyGo executives their best marketing tool ever. "For as little as $3 per day, commuters can ride the bus as opposed to filling their gas tanks for over $3 a gallon," IndyGo acting director Bruce Behncke said.
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