- Email: [email protected]
Down but not out
D o w n But N o t Out Following the devastation wrought by Katrina and Rita, the industry begins post-hurricane recovery. By Greg Valero, Editor and Publisher
Editor's Note: The "At Issue" series is a year-long
miles of New Orleans, the largest city hit by Katrina, according to a USA Today analysis of records from the Federal Emergency Management Agency. To say New Orleans businesses were hard hit by Katrina would be a gross understatement. The storm submerged 80 percent of the city and killed hundreds of people. The sight of floating bodies, flooded streets and highways, and thousands of evacuees seeking refuge only begin to illustrate the devastation the hurricane wrought on the Big Easy. No one is certain how long it will take Gulf Coast Under Mayor Ray Nagin's latest re-entry plan, communities to recover from two entrepreneurs in eight New Category 4 hurricanes that hit Orleans ZIP codes began returnlandfall about one month apart. ing to their businesses in late The disasters destroyed thouSeptember to assess the damage sands of businesses and homes, and begin the rebuilding process. disabled major oil and gas faciliAt press time, the rest of the ties, and forced massive evacuacity was expected to reopen by tions. As flood waters in devasOct. 5, except for the Lower 9th tated areas, such as New Ward in east New Orleans-Orleans, recede and residents which won't be reopened anytime return, the locals are expected to soon. It was hit by a double band together and rebuild, a whammy of flooding--first from process that could take years. Katrina and then Hurricane Rita "I think that for most small last month. businesses, such as metal finishIn late September, the death toll ers, the interruption of business from Katrina increased to 1,132, is what's going to hurt the most," authorities said, including nearly David Barrack, executive director 900 people from Louisiana. of the Surface Finishing Industry Officials in Mississippi anCouncil (SFIC; Orlando, Fla.), nounced that 220 people had died speculates. "That's not easy to in that state while another 14 bounce back from." people were killed in Florida and Hurricane Katrina, which two in Alabama. The n u m b e r of An unidentified man makes his way through a slammed into the Gulf Coast in flooded street in N e w Orleans. It will take people killed by Katrina, in parlate August, dispersed 1.3 mil- weeks to empty streets that may have to be ticular, is expected to rise as reslion area households to commu- razed because of the health risk. (Photo cour- cuers continued searching for tesy of AP/Wide World Photos.) nities in every state from Maine hurricane victims. The death toll to Hawaii, according to the first official accounting from its successor, Hurricane Rita, stands at i00. of the disaster's unprecedented ripple effect. Some evacuees had no choice in where they were relocatSURFACE FINISHERS AFFECTED ed. About three-fourths of the households went to The effect of Katrina and Rita on job shops and capBaton Rouge and other communities within 250 tive operations located in hurricane-stricken areas
in-depth look at hot topics and challenges impacting the metal finishing industry. Our objective is to help y o u better understand the dynamics reshaping job and captive shops. This article reports on how the surface finishing industry was impacted by Hurricanes Katrina and Rita.
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www.metalfinishing.com
is hard to pin down, considreports it was spared from ering that the city was the wrath of Katrina. "We evacuated by military perwere lucky to have no real sonnel in September and damage here," says re-entry dates were delayed Stephanie Spencer, a recepby Rita. Less than 10 pertionist and wife of owner L. cent of U.S. metal finishers Clay Spencer. "We hardly are located in the missed a day. We're safe, Southeast, which includes and most of our employees Texas, Louisiana, and are already back." The Mississippi, according to metal finisher did, however, industry estimates. incur damage to some At press time, local trade antiques and cars stored in association affiliates were a facility in a part of the city still trying to reach out to that was flooded. impacted members to assess Rita was less forgiving on the damage. "We made a Katrina flooded 80% of New Orleans, leaving much of the other surface finishing opersolicitation from our mem- city uninhabitable. (Photo courtesy of AP/Wide World ations. Gull Industries bers for work and equip- Photos.) (Houston) reports it lost ment for metal finishers power and its doors were impacted by Katrina. But we've had trouble making closed as of Sept. 26. At press time, J. Kelly Mowry, connections and setting up distribution," Barrack says. president, anticipated power would be restored "The situation down South is still very much in flux." within 24 hours. Two Gull plants held up against Simmons Plating and Grinding (New Orleans) Rita, suffering minimal damage.
Circle 007 on reader information card or go to www.metalfinishing.com/advertisers C)ctoher 9005
9
The situation could have been a lot worse for Gull if the metal finisher did not batten down the hatches a few days earlier. "It took us a full day to implement our emergency plan," Mowry says. "Our plan calls for us, first and foremost, to protect the personal safety of our people, then to protect the environment, then protect the business, then protect our records--paper and electronic." Gull had previously established a staging area for, among other things, company equipment and personnel in Livingston, Texas, about 100 miles north of Houston, where Mowry sent his family a few days before Rita. Employees were dispersed to a second staging area in Austin, Texas. "We've got a Plan A, but you've got to have a Plan B, C, D, E and F, too," he says. BUSINESS & m:CONOM|C iMPACT The U.S. economy was growing solidly before Hurricanes Katrina and Rita, whose double blow is expected to make for rocky business activity in the months ahead. A recently released U.S. Commerce Department report showed the gross domestic product (GDP) grew at a 3.3% annual rate in the second quarter, confirming that economic activity was hum-
ruing along at a respectable pace before the disasters struck. GDP measures the value of all goods and services produced within the U.S. and considered the best barometer of the nation's economic health. In the aftermath of the two hurricanes, however, economists predict production and hiring will take a hit, slowing overall economic activity in the second half of this year. The number of Americans thrown out of work by Hurricane Katrina recently reached 279,000, according to published reports. The Congressional Budget Office (CBO; Washington) estimates Katrina--which is expected to be the most expensive hurricane in U.S. history--could result in a loss of as many as 400,000 jobs in the final four months of this year and slash economic growth by as much as a full percentage point. Rita is also expected to exact an economic toll because of the business disruptions caused by the evacuations, flooding, and loss of power, officials say, although damage estimates have been lower than for Katrina. However, some economists believe growth will be boosted next year, reflecting the bil-
Anodizing Equipment
• Hoists Type I Chromic Type II Sulfuric Type III Hardcoat
• Controls • Upgrades & Retrofits • Supplies & Service
Technic is a leader in the design and manufacturing of a full line of processing equipment for electroplating & anodizing.
For Chemistry and Equipment, Technic has the Solutions.
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lions of dollars in government and private money that will be spent on rebuilding efforts. Heating oil and gasoline prices rose to their highest levels since Hurricane Katrina struck the U.S. a month ago as refineries struggled to produce enough fuels, with about a quarter of the nation's refining capacity shut, according to Bloomberg. Operating refineries are straining to replenish gasoline stockpiles while meeting rising heating-fuel needs. In late September, heating oil for October rose 3.5% to $2.14 a gallon on the New York Mercantile Exchange, the highest close since Sept. 1, when it reached a record $2.21. That was three days after Katrina hit, disabling 5% of U.S. refining capacity through the month. Meanwhile, crude oil for November rose 64 cents, or 1%, to $66.99 a barrel on Nymex. Oil reached a record $70.85 on Aug. 30, the day after Katrina struck, Bloomberg reports. Prices have more than doubled from the end of 2003. As many as 40 platforms and 18 rigs in the Gulf may be missing or damaged, according to published reports. It is unlikely that hazardous materials and chemicals from damaged metal finishing plants spilled
over into flooded streets, experts say. The industry is highly regulated by the federal government for environmental pollution. "We are charged by law to keep certain things--dangerous and toxic chemicals, for example--under tight security," Mowry says. "It's all got to be secure within the plant." STARTING OVER Hurricane Katrina devastated large parts of Louisiana, Mississippi, and Alabama. It is estimated that insurance companies will have to pay out more than $60 billion in insured losses. In the wake of Katrina, the National Flood Insurance Program (NFIP) recently announced it will modify the way it settles claims to expedite the response to those policyholders in storm-stricken areas under a new policy. "The National Flood Insurance Program is working closely with the insurance industry to speed the claims process and enable adjusters to help policyholders get settlements quickly," Acting Federal Flood Insurance Administrator David Maurstad says. "For many Hurricane Katrina victims, the effort to rebuild their lives begins with filing a flood insurance claim." NFIP is managed by the
Circle 011 on reader information card or go to w w w , metalfinishing.com/advertisers October 2005
11
A New Orleans highway is shown in this aerial view shortly after Katrina hit the city, (Photo courtesy of AP/Wide World Photos.)
Communities and cities devastated by the hurricanes are already moving debris and making plans for reconstruction. (Photo courtesy of AP/Wide World Photos.)
D e p a r t m e n t of Homeland Security's Federal Emergency Management Agency (Washington). Speculation in industry circles indicates a number of metal finishers are under-insured, namely for economic reasons. For example, "when you buy a piece of equipment for a metal-finishing ship, it depreciates in value at an incredible rate," notes Bill Saas, president, SFIC and Metal Finishing Suppliers' Association (MFSA; Orlando, Fla.). "It's difficult to insure for replacement value." But collecting flood and business-interruption insurance money will not be an easy task for surface finishers. Barrack, who doubles as executive director of the National Association of Public Insurance Adjustors (Potomac Falls, Va.), predicts it may take years to settle a n u m b e r of insurance claims that are challenged in court. "The governor of Mississippi is suing the insurance companies over the lack of provisions in policies for floods," he points out. "Whatever precedent is set in that case will have huge ramifications across the country, certainly in any areas prone to flooding." As hurricane-stricken industry members rebuild or restart their businesses, some materials will be in short supply, observers say, especially those used for w a t e r t r e a t m e n t . Such chemicals were manufactured in large quantity at Gulf Coast facilities. In
addition, European raw materials suppliers as well as finished goods shipped by U.S. job and captive shops often use Gulf Coast ports. "So there's still a big question w h e n those supplies will be flowing freely again," Saas says. A n u m b e r of i n d u s t r y suppliers say t h e y are donating money, materials, and supplies to hurricane victims as well as working closely with customers whose businesses were compromised by the storms. S F I C - - t h e umbrella organization for the A m e r i c a n E l e c t r o p l a t e r s and Surface F i n i s h e r s Society (Orlando, Fla.), MFSA, and the National Association of Metal Finishers (Orlando, F l a . ) announced it is seeking the help of industry members to assist surface finishers in the Gulf states who were devastated by Katrina and Rita. "We are asking all m e m b e r s to offer a helping hand by donating equipment, personnel, material, money, etc., as quickly as possible," Barrack says. If you can help, e-mail a list of items you can provide to SFIC headquarters at [email protected] or call (703) 433-0369. In order to make contributions available to those in need, inform SFIC of any companies you know of that have been affected by the storms.
12
Steve Bjerklie contributed to this report. www.metalfinishing.com
Editor's Note: The "At Issue" series is a year-long
miles of New Orleans, the largest city hit by Katrina, according to a USA Today analysis of records from the Federal Emergency Management Agency. To say New Orleans businesses were hard hit by Katrina would be a gross understatement. The storm submerged 80 percent of the city and killed hundreds of people. The sight of floating bodies, flooded streets and highways, and thousands of evacuees seeking refuge only begin to illustrate the devastation the hurricane wrought on the Big Easy. No one is certain how long it will take Gulf Coast Under Mayor Ray Nagin's latest re-entry plan, communities to recover from two entrepreneurs in eight New Category 4 hurricanes that hit Orleans ZIP codes began returnlandfall about one month apart. ing to their businesses in late The disasters destroyed thouSeptember to assess the damage sands of businesses and homes, and begin the rebuilding process. disabled major oil and gas faciliAt press time, the rest of the ties, and forced massive evacuacity was expected to reopen by tions. As flood waters in devasOct. 5, except for the Lower 9th tated areas, such as New Ward in east New Orleans-Orleans, recede and residents which won't be reopened anytime return, the locals are expected to soon. It was hit by a double band together and rebuild, a whammy of flooding--first from process that could take years. Katrina and then Hurricane Rita "I think that for most small last month. businesses, such as metal finishIn late September, the death toll ers, the interruption of business from Katrina increased to 1,132, is what's going to hurt the most," authorities said, including nearly David Barrack, executive director 900 people from Louisiana. of the Surface Finishing Industry Officials in Mississippi anCouncil (SFIC; Orlando, Fla.), nounced that 220 people had died speculates. "That's not easy to in that state while another 14 bounce back from." people were killed in Florida and Hurricane Katrina, which two in Alabama. The n u m b e r of An unidentified man makes his way through a slammed into the Gulf Coast in flooded street in N e w Orleans. It will take people killed by Katrina, in parlate August, dispersed 1.3 mil- weeks to empty streets that may have to be ticular, is expected to rise as reslion area households to commu- razed because of the health risk. (Photo cour- cuers continued searching for tesy of AP/Wide World Photos.) nities in every state from Maine hurricane victims. The death toll to Hawaii, according to the first official accounting from its successor, Hurricane Rita, stands at i00. of the disaster's unprecedented ripple effect. Some evacuees had no choice in where they were relocatSURFACE FINISHERS AFFECTED ed. About three-fourths of the households went to The effect of Katrina and Rita on job shops and capBaton Rouge and other communities within 250 tive operations located in hurricane-stricken areas
in-depth look at hot topics and challenges impacting the metal finishing industry. Our objective is to help y o u better understand the dynamics reshaping job and captive shops. This article reports on how the surface finishing industry was impacted by Hurricanes Katrina and Rita.
T
8
i
m
e
.
www.metalfinishing.com
is hard to pin down, considreports it was spared from ering that the city was the wrath of Katrina. "We evacuated by military perwere lucky to have no real sonnel in September and damage here," says re-entry dates were delayed Stephanie Spencer, a recepby Rita. Less than 10 pertionist and wife of owner L. cent of U.S. metal finishers Clay Spencer. "We hardly are located in the missed a day. We're safe, Southeast, which includes and most of our employees Texas, Louisiana, and are already back." The Mississippi, according to metal finisher did, however, industry estimates. incur damage to some At press time, local trade antiques and cars stored in association affiliates were a facility in a part of the city still trying to reach out to that was flooded. impacted members to assess Rita was less forgiving on the damage. "We made a Katrina flooded 80% of New Orleans, leaving much of the other surface finishing opersolicitation from our mem- city uninhabitable. (Photo courtesy of AP/Wide World ations. Gull Industries bers for work and equip- Photos.) (Houston) reports it lost ment for metal finishers power and its doors were impacted by Katrina. But we've had trouble making closed as of Sept. 26. At press time, J. Kelly Mowry, connections and setting up distribution," Barrack says. president, anticipated power would be restored "The situation down South is still very much in flux." within 24 hours. Two Gull plants held up against Simmons Plating and Grinding (New Orleans) Rita, suffering minimal damage.
Circle 007 on reader information card or go to www.metalfinishing.com/advertisers C)ctoher 9005
9
The situation could have been a lot worse for Gull if the metal finisher did not batten down the hatches a few days earlier. "It took us a full day to implement our emergency plan," Mowry says. "Our plan calls for us, first and foremost, to protect the personal safety of our people, then to protect the environment, then protect the business, then protect our records--paper and electronic." Gull had previously established a staging area for, among other things, company equipment and personnel in Livingston, Texas, about 100 miles north of Houston, where Mowry sent his family a few days before Rita. Employees were dispersed to a second staging area in Austin, Texas. "We've got a Plan A, but you've got to have a Plan B, C, D, E and F, too," he says. BUSINESS & m:CONOM|C iMPACT The U.S. economy was growing solidly before Hurricanes Katrina and Rita, whose double blow is expected to make for rocky business activity in the months ahead. A recently released U.S. Commerce Department report showed the gross domestic product (GDP) grew at a 3.3% annual rate in the second quarter, confirming that economic activity was hum-
ruing along at a respectable pace before the disasters struck. GDP measures the value of all goods and services produced within the U.S. and considered the best barometer of the nation's economic health. In the aftermath of the two hurricanes, however, economists predict production and hiring will take a hit, slowing overall economic activity in the second half of this year. The number of Americans thrown out of work by Hurricane Katrina recently reached 279,000, according to published reports. The Congressional Budget Office (CBO; Washington) estimates Katrina--which is expected to be the most expensive hurricane in U.S. history--could result in a loss of as many as 400,000 jobs in the final four months of this year and slash economic growth by as much as a full percentage point. Rita is also expected to exact an economic toll because of the business disruptions caused by the evacuations, flooding, and loss of power, officials say, although damage estimates have been lower than for Katrina. However, some economists believe growth will be boosted next year, reflecting the bil-
Anodizing Equipment
• Hoists Type I Chromic Type II Sulfuric Type III Hardcoat
• Controls • Upgrades & Retrofits • Supplies & Service
Technic is a leader in the design and manufacturing of a full line of processing equipment for electroplating & anodizing.
For Chemistry and Equipment, Technic has the Solutions.
V TECHNIC INC ~ J ~
EQUIPMtENTI3tVISlON
(401)728-7081 [email protected] www.technic.com
Circle 040 on reader information card or go to www.metalfinishing.com/advertisors
10
Circle 029 on reader information card or go to www.metalfinishing.com/advertisers www.metalfinishing.com
lions of dollars in government and private money that will be spent on rebuilding efforts. Heating oil and gasoline prices rose to their highest levels since Hurricane Katrina struck the U.S. a month ago as refineries struggled to produce enough fuels, with about a quarter of the nation's refining capacity shut, according to Bloomberg. Operating refineries are straining to replenish gasoline stockpiles while meeting rising heating-fuel needs. In late September, heating oil for October rose 3.5% to $2.14 a gallon on the New York Mercantile Exchange, the highest close since Sept. 1, when it reached a record $2.21. That was three days after Katrina hit, disabling 5% of U.S. refining capacity through the month. Meanwhile, crude oil for November rose 64 cents, or 1%, to $66.99 a barrel on Nymex. Oil reached a record $70.85 on Aug. 30, the day after Katrina struck, Bloomberg reports. Prices have more than doubled from the end of 2003. As many as 40 platforms and 18 rigs in the Gulf may be missing or damaged, according to published reports. It is unlikely that hazardous materials and chemicals from damaged metal finishing plants spilled
over into flooded streets, experts say. The industry is highly regulated by the federal government for environmental pollution. "We are charged by law to keep certain things--dangerous and toxic chemicals, for example--under tight security," Mowry says. "It's all got to be secure within the plant." STARTING OVER Hurricane Katrina devastated large parts of Louisiana, Mississippi, and Alabama. It is estimated that insurance companies will have to pay out more than $60 billion in insured losses. In the wake of Katrina, the National Flood Insurance Program (NFIP) recently announced it will modify the way it settles claims to expedite the response to those policyholders in storm-stricken areas under a new policy. "The National Flood Insurance Program is working closely with the insurance industry to speed the claims process and enable adjusters to help policyholders get settlements quickly," Acting Federal Flood Insurance Administrator David Maurstad says. "For many Hurricane Katrina victims, the effort to rebuild their lives begins with filing a flood insurance claim." NFIP is managed by the
Circle 011 on reader information card or go to w w w , metalfinishing.com/advertisers October 2005
11
A New Orleans highway is shown in this aerial view shortly after Katrina hit the city, (Photo courtesy of AP/Wide World Photos.)
Communities and cities devastated by the hurricanes are already moving debris and making plans for reconstruction. (Photo courtesy of AP/Wide World Photos.)
D e p a r t m e n t of Homeland Security's Federal Emergency Management Agency (Washington). Speculation in industry circles indicates a number of metal finishers are under-insured, namely for economic reasons. For example, "when you buy a piece of equipment for a metal-finishing ship, it depreciates in value at an incredible rate," notes Bill Saas, president, SFIC and Metal Finishing Suppliers' Association (MFSA; Orlando, Fla.). "It's difficult to insure for replacement value." But collecting flood and business-interruption insurance money will not be an easy task for surface finishers. Barrack, who doubles as executive director of the National Association of Public Insurance Adjustors (Potomac Falls, Va.), predicts it may take years to settle a n u m b e r of insurance claims that are challenged in court. "The governor of Mississippi is suing the insurance companies over the lack of provisions in policies for floods," he points out. "Whatever precedent is set in that case will have huge ramifications across the country, certainly in any areas prone to flooding." As hurricane-stricken industry members rebuild or restart their businesses, some materials will be in short supply, observers say, especially those used for w a t e r t r e a t m e n t . Such chemicals were manufactured in large quantity at Gulf Coast facilities. In
addition, European raw materials suppliers as well as finished goods shipped by U.S. job and captive shops often use Gulf Coast ports. "So there's still a big question w h e n those supplies will be flowing freely again," Saas says. A n u m b e r of i n d u s t r y suppliers say t h e y are donating money, materials, and supplies to hurricane victims as well as working closely with customers whose businesses were compromised by the storms. S F I C - - t h e umbrella organization for the A m e r i c a n E l e c t r o p l a t e r s and Surface F i n i s h e r s Society (Orlando, Fla.), MFSA, and the National Association of Metal Finishers (Orlando, F l a . ) announced it is seeking the help of industry members to assist surface finishers in the Gulf states who were devastated by Katrina and Rita. "We are asking all m e m b e r s to offer a helping hand by donating equipment, personnel, material, money, etc., as quickly as possible," Barrack says. If you can help, e-mail a list of items you can provide to SFIC headquarters at [email protected] or call (703) 433-0369. In order to make contributions available to those in need, inform SFIC of any companies you know of that have been affected by the storms.
12
Steve Bjerklie contributed to this report. www.metalfinishing.com