The companies that supply the rubber industry are coming back to normal production-albeit slowly-in the wake of Hurricane Katrina, which struck the nation's Gulf Coast area Aug. 28 with savage, deadly fury.
Some 11 days after the catastrophe that, by some officials' estimates, may have claimed up to 10,000 lives and has left untold thousands homeless, oil refineries and petrochemical feedstock producers are reopening for business on the Gulf Coast-but only a few at a time. Natural rubber (NR) shipments also are getting through-at notably higher prices than before the disaster.
Meanwhile, companies were trying to locate missing employees in Louisiana and Mississippi, even as they pledged humanitarian aid to the general rescue efforts.
Tire makers weren't immediately panicked over the long-term effects on production in the aftermath of the storm, but most acknowledged that prolonged disruptions of petroleum feedstock production-as well as disrupted shipping through the important natural rubber ports of New Orleans and Pascagoula, Miss.-could cause severe problems in tire production.
A number of tire companies-including Goodyear, Continental Tire North America Inc. and Kumho Tire USA Inc.-announced price increases on at least some product lines, because of higher raw materials costs. Goodyear, however, said it decided on the price hike even before the hurricane hit.
A Goodyear spokesman said his company's operations have not been affected appreciably by the storm. ``It's mostly a matter of logistics,'' he said. ``Natural rubber that we might have shipped through New Orleans for the plants in Topeka (Kan.) or Lawton (Okla.) now has to go through Morehead City (N.C.). It's just a matter of making sure the rubber reaches its destination.''
Goodyear raised prices on various tire lines 5 to 8 percent Sept. 1. Kumho is raising prices on medium truck tires by 4 percent effective Oct. 1, and Conti is boosting prices on truck and off-road tires by up to 7 percent on the same date.
Chemical Market Associates Inc. (CMAI), a Houston-based consulting firm, is publishing a daily update on its Web site regarding closings and reopenings of Gulf Coast oil rigs and platforms, refineries and feedstock operations.
As of Sept. 7, 163 oil platforms and 16 rigs were still closed, compared with 482 platforms and 79 rigs closed on Aug. 31, CMAI reported, quoting figures from the U.S. Department of the Interior.
Several refineries and feedstock production facilities that were shut down or producing at reduced rates were either running or on the verge of resuming production as of Sept. 6, CMAI said.
The NR situation also is looking up, thanks to shipments stored at or diverted to eastern ports such as Morehead City and Norfolk, Va.
``From our side, things are going pretty well,'' said one source close to the rubber trade who asked to remain anonymous. ``There was a little bit of a hiccup, but not much.''
Although NR is readily available, prices are going through the roof, the source noted. Standard Indonesian Rubber 20-the grade most often used by U.S. tire makers-stood at $1.55 per kilogram at the port of origin Sept. 7, compared with $1.39 per kilo Aug. 23.
Meanwhile, at least two rubber industry suppliers in the Gulf Coast declared force majeure-the voiding of their supply contracts because of an ``act of God.''
Columbian Chemicals Co. said its North Bend, La., carbon black plant received only minimal damage in the hurricane, but the closing of the Port of New Orleans and problems with rail transportation meant it could not guarantee carbon black shipments until it could restore normal production and shipping.
Shell Chemical Corp. announced force majeure allocations for September of 50 percent for ethylene and 75 percent for butadiene, according to CMAI.
At one point workers at major eastern rubber ports such as Morehead City reportedly were working 12-hour shifts to unload rubber shipments diverted from the Gulf Coast, while rubber traders worked around the clock to try to ensure that customers received the rubber they ordered.
One trader, RCMA Americas Inc., urged customers to order new stocks of natural rubber early to make up for inevitable shipping delays. ``We have said this a million times, but you CANNOT wait until the last moment to buy, especially in this market,'' said the RCMA e-mail newsletter.
``Part of the equation now is how we import raw materials,'' said a Bridgestone/Firestone (BFS) spokesman. ``We were using New Orleans and Pascagoula (Miss.) as our natural rubber ports, but what we're doing is diverting our shipments to other ports, such as Norfolk and Baltimore.''
Michelin North America Inc. also reported diverting two rubber shipments, though its normal port for rubber is Charleston, S.C. Without going into detail, a Michelin spokesman said his company did not anticipate any immediate problems with production.
Major hit on businesses
Even a dozen days after the Category 4 hurricane made landfall, the fate of many businesses in the stricken areas was in question. While many were damaged-some are simply gone.
Automotive News, a sister publication of Tire Business, reported that it likely will be a very long time before any new or used cars are sold in New Orleans. As water from Lake Pontchartrain breached levees and flooded the Big Easy, it was feared the city's 75 to 80 new-car dealerships could be a total loss. A DaimlerChrysler district sales manager in Baton Rouge, for instance, said the car maker expected that because of the rising water, ``all of the New Orleans metro stores are assumed to be gone.'' Most cars were underwater or sustained water damage. ``The devastation is unbelievable,'' he added.
The National Automobile Dealer Association's state director for Louisiana told the newspaper dealers in New Orleans are out of business for the foreseeable future.
As for tire dealers and tire distribution in the affected areas, rubber companies have also been faced with a much grimmer problem: locating missing employees.
A BFS spokeswoman said her company has no distribution center in the Gulf Coast region. Of far more immediate concern to the company than distribution was what happened to the employees of the 21 company-owned tire stores in the affected areas. About 10 company store employees are still missing, she said, and the tire maker is doing everything it can to find them.
``They have no phone service, and they may be moving from shelter to shelter,'' she said.
All 12 Louisiana Firestone Tire & Service Centers in the affected area were still closed as of Sept. 8 and were believed to be either destroyed or heavily damaged by the storm, according to the spokeswoman, but six of nine Mississippi company-owned stores have reopened.
All nine Mississippi stores were closed except for one, which had its own generator, the spokeswoman said. ``We don't know the damage yet, but it will be significant,'' she said.
Meanwhile, Nashville, Tenn.-based BFS has been doing everything it can to ensure the safety of its employees in the area. A Louisiana district manager has opened his house to three complete families, including pets, left homeless in the hurricane. The assistant district manager also is housing some company employees, the spokeswoman said.
``The situation is horrible beyond belief,'' she said. ``But when you see the kindness that people are capable of in a situation like this, it's also very heartening.''
Greenville, S.C.-based Michelin said its senior management was reviewing the situation with its Gulf Coast dealers, from whom word was still scarce at presstime. The company has no distribution centers in the Gulf Coast area, so there was no impairment of distribution for other areas of the U.S. On the other hand, for distribution within the affected area, nothing was moving either in or out, a spokesman said.
Some Goodyear dealer locations have been damaged by the storm, a spokesman for the tire maker said, conceding ``it's hard enough trying to verify all of our own damage.
``We had initial power knocked out at several retail stores, and most were temporarily closed anyhow due to the evacuation order as the storm approached. We still have 12 retail stores that are closed. Some have unknown damage because we aren't able to get in to assess the condition.''
The spokesman said the firm has accounted for most of the retail store employees, although it is attempting to get more detailed information.
The Akron tire maker has found only one Wingfoot commercial tire center that sustained some damage, the spokesman said.
``While we're still having difficulty assessing damage on some of the properties, it's obviously very uncertain how much business these outlets would have anyway, since the people have been moved out of the area,'' he said.
The company is considering the option of establishing temporary service sites-in addition to its existing sites-to aid emergency vehicles working in the stricken areas, he added. ``We'll likely put some mobile tire service trucks into action such as our Just Tires `Tire Valet' service from Chicago.''
The spokesman reported that ``most of our Goodyear associates in the area are accounted for, although we continue to strive for more information. This is our major effort, and we're finding that many of them are starting to show up at other Goodyear outlets in other areas.''