Ivan's impact was more annoyance than catastrophe

Staff -- Purchasing, 10/7/2004

This summer's barrage of tropical storms and hurricanes Charley, Frances, Gaston and Ivan has been the worst late-summer weather in 40 years and has disrupted minerals and metals business from the Caribbean to central Alabama, although economists say any economic pain is likely to be short-lived.

Production at several alumina refineries in Jamaica was reduced and shipments slowed to a crawl due mostly to the damage caused by Hurricane Ivan, which battered the island in mid-September. Alcoa of the U.S., Norsk Hydro of Norway and Swiss-based commodities group Glencore International all reported damages to their plants or nearby ports on the Caribbean island. Hurricane Ivan was a Category five storm, the most intense on the 1-5 hurricane scale, when it hit Jamaica, killing at least 19 people

Pittsburgh-based Alcoa, the world's largest aluminum maker, actually declared force majeure to its customers for a time because of the temporary shutdown at its Jamaica Alumina Co. (Jamalco) refinery and damage to the port from which the plant ships its alumina. Force majeure literally means "greater force" and is a business condition permitting a company to depart from the strict terms of a contract because of an event or effect that cannot be reasonably controlled. Alcoa says the refinery experienced no significant damage from the hurricane and would be restarted as power was restored.

The port from which Jamalco ships alumina did suffer damage from Ivan so there have been delays in shipments from the facility. Jamalco, a 50-50 joint venture between Alcoa and the Jamaican government, has the capacity to produce 1.25 million metric tons/year of alumina, an intermediate product in the refining of bauxite into aluminum.

Norsk Hydro, an energy, chemicals and metals group, said it took a week to restart production at its Alpart refinery in Jamaica, which produces 1.65 million metric tons annually year of alumina. "There was some damage to our harbor, and also some in the plant area," notes a Norsk Hydro spokesman. The Alpart (Alumina Partners of Jamaica) plant, which Norsk Hydro owns (35%) with Glencore (65%), was shut while Jamaica was preparing for Ivan to strike.

Glencore also holds a 93% share of the West Indies Alumina Co. (Windalco) refinery in central Jamaica, which produces 1.2 million metric tons/year. That plant also was damaged-forcing another force majuere on shipments for a time—but has come back into production.

Prior to Hurricane Ivan striking the U.S. mainland along the Gulf of Mexico coastline, the Coast Guard closed seven ports in four states, including New Orleans in Louisiana, which is the hub of the U.S.'s third-largest port complex. The complex is a major gateway for ships on the Mississippi River and in the Gulf of Mexico for commodities such as steel, rubber, zinc, copper, aluminum and grain, but experts say that hurricane-disruption was minimal.

Traders say some cargo ships reversed their course to avoid the storm. But, overall, the disruption delayed the supply chain only for 48 hours by diverting traffic to ports down the coast in Texas at Houston, Galveston and Freeport—"and that's not a critical amount of time for these types of materials," says Janet Plume, editor of the Gulf Shipper trade magazine told the Associated Press. Still, Hurricane Ivan cost the Port of New Orleans $19 million a day as cargo ships were turned away, says chief executive Gary LaGrange.

Several steel producers—Bayou Steel of LaPlace, La., and the Alabama mills of SMI Steel in Birmingham, Ipsco in Mobile and Nucor in Tuscaloosa—closed for a time during the height of Ivan's onslaught, as did several metals processing distributorships in the region. Hurricane Ivan passed directly through Alabama without significantly affecting the steel mills, which didn't experience flooding or damage,

Actually, the biggest business disruption wasn't to metals but to energy, since about one-quarter of all U.S. oil and natural gas production is concentrated in the waters off Texas, Louisiana, Mississippi and Alabama.