Hurricane Irma Disrupts Pulp And Paper Production

This year’s hurricane season has surpassed a number of natural disaster records, including damage-related and economic costs. Damages caused by Hurricane Harvey have been estimated anywhere from $65 billion to $190 billion, while Irma is thought to have caused $50 billion to $100 billion in destruction.

 

To put this into perspective, Harvey and Irma wreaked enough havoc to dampen US (yes, the entire nation’s) GDP growth by 0.6 to 0.8 percent in a single quarter, according to investment bank estimates.

 

Many industries were affected, including the pulp and paper industry.

 

With the hurricanes’ eyes set on the southeast states of the US, many pulp and paper mills, 18 total, from Texas to Georgia and Florida were forced to shut down or remain idle, though minimal to no damage was reported.

 

Hurricane Harvey caused several mills to halt processing and production activities in Texas, some for over a week. Shutdowns included International Paper’s (IP) Orange, TX, containerboard mill; USG’s Galena, TX, wallboard mill; and WestRock’s Evadale, TX, bleached board mill. The combined production capacity of these plants is over 1.5 million tons per year.

 

Hurricane Irma forced the closure of 15 mills spanning Georgia and Florida. Companies forced to board up included Caraustar, DS Smith/Interstate, Georgia-Pacific, International Paper, Rayonier AM, Resolute Forest, and WestRock. The combined production capacity of their closed mills is nearly 6.5 million tons per year.

 

Containerboard used in the production of packaging such as cardboard boxes was one of the major grades disproportionately impacted. At least 54,000 tons of lost production are estimated among all shut containerboard mills, though some analysts believe this estimate to be much greater.

 

The estimated financial losses these companies expect to face are high. IP CFO Glenn Landau expects a net $35 million negative impact on 3rd quarter earnings, a cost that would have been much higher had they not postponed a scheduled maintenance shutdown of their Orange, TX, mill to next year.

 

WestRock CEO Steve Voorhees also foresees heavy financial burdens, as the combined cost of Hurricane Harvey and Irma is likely to be twice the cost of October 2016’s Hurricane Mathew, equating to about $26 million in damages.

 

Post-hurricane effects still in play

 

Lost production due to shutdowns or idling is only a present concern, as many company heads warn of the lingering effects of Harvey and Irma to the supply chain.

 

The storms will push input costs higher, including chemical and wood fiber costs. As Voorhees said, “wet is not good for wood costs”. However, higher input prices will be offset by lower recycled material costs, particularly old corrugated container (OCC) or cardboard.

 

Transportation networks, including railroads, ports, and roads and highways, were, and continue to be, disrupted by flooding and heavy wind damage.

 

Though some mainline railways have been restored throughout Georgia and Florida, there are still major tracks, including the Jacksonville to Orlando route, that are being assessed for damage with dates of repair completion uncertain.

 

Major ports were forced to shut down, including facilities in Savannah and Brunswick, GA, Charleston, SC, and Jacksonville, FL, though these ports have opened on September 12th and 13th and are accepting all vessels.

 

Employees continue to be affected by Harvey and Irma, meaning some mills may be short-staffed. While some are still without power, others forced to evacuate are unable to return to work as access to certain areas remains limited. Some companies, including IP, have created an employee relief fund to help workers overcome the devastation wrought by these storms.

 

Because of climate change, the occurrence of record-breaking natural disasters and coastline erosion and damage will become more likely. To mitigate the costs associated with stronger storms and other disasters, contact our industry veterans at Berg Mill Supply. For over half a century, Berg Mill has been able to overcome economic hardships through innovative alternatives and diversified networks.

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