Chatting with Mercury Resources CEO Anton Posner on supply-chain impacts of COVID-19

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The COVID-19 pandemic has had wide-ranging impacts on the global economy, disrupting supply chains and depressing commodities markets.

As Deloitte noted in a recent report on COVID-19 — the “black swan of 2020” — the pandemic’s total impact on supply chains is still unknown.

From a metals perspective, demand has started to recover slowly in China as restrictions have been eased, but it remains to be seen how the country and the supply chains dependent on China will react should subsequent waves of the coronavirus strike.

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To get a sense for what is going on with supply chains, we chatted with Anton Posner, CEO of Mercury Resources, which offers logistical expertise for the shipment of dry goods (both dry bulk and break-bulk) by barge, train, truck or vessel, particularly for the metals sector.

In North America, however, Posner said there hasn’t been a significant impact in the industrial commodities supply chain, whether it’s imports of steel in California, copper concentrate exports or stevedoring.

“If you sat in our organization and we didn’t tell you that there was a pandemic going on, and you were just managing the flow of rail cars, rail freight throughout the continent and barges on the river system and stevedoring operations, you would never know that there was a problem,” Posner said.

It remains to be seen, however, what impact the virus will have on stevedoring operations going forward if the COVID-19 virus continues to spread, especially in port cities. Much attention has been given to outbreaks in meatpacking facilities — earlier this month, the Des Moines Press Register reported more than 1,600 workers at four Iowa meatpacking plants were infected with the novel coronavirus — but stevedoring operations at ports are crucial to the efficiency of supply chains.

In April, the International Longshoremen’s Association reported two of its members working at the Port of New Orleans had died after contracting the coronavirus.

A month later, Carl W. Bentzel and Louis E. Sola, commissioners on the Federal Maritime Commission, sent a letter to the House Committee on Transportation and Infrastructure and the Senate Committee on Commerce, Science, and Transportation asking for the consideration of financial assistance to bridge expected shortfalls in Q2.

“The system of leasing marine terminals at U.S. ports is predicated on projected cargo volumes, and projections indicate that sustained demand reductions will make it financially difficult for terminals to sustain lease payments,” the ILA said in a release. “However, the continued operation of our ports and terminals during this time is critical.

“In their letter, the Commissioners also praised the essential work of marine terminal operators and longshore labor during this ongoing COVID-19 crisis. The men and women who work to deliver our essential needs such as the merchant marine, the longshoremen, railroad laborers and truckers, along with other transportation system service providers, are hard at work during the COVID-19 health crisis. We are indebted to their continued service, and they deserve the thanks of our nation.”

For example, the Port of Houston — the sixth-largest container port in the U.S. — saw a 12% year-over-year decline in port tonnage handled in April, falling to 221,540 twenty-foot equivalent units (TEUs).

“Port Houston handled 3,910 auto units in April, 41 percent less than the same month last year, and down 31 percent for the first four months as compared to the same period in 2019,” the port reported May 13. “Steel, primarily used in the energy industry, is down 50 percent year-to-date at 784,733 short tons through the end of April, a reflection of today’s turmoil in the oil and gas sector.”

The Port of Los Angeles saw a year-over-year decline of 6.45% in April, having moved 688,999 TEUs.

“Given the unique circumstances of a trade war and pandemic, April volumes are better than expected,” Port Executive Director Gene Seroka said. “As we move deeper into the remainder of the second quarter, we’re forecasting significantly lower volumes, particularly on the import side. There are at least 28 voided vessel sailings. Retailer orders are soft as consumer purchasing and confidence has dropped precipitously.”

While Posner said the coronavirus pandemic has not yet had a noticeable impact on inland commodities flows in North America, that would change and lead to “fairly significant disruptions'” if large outbreaks occur among transportation operators, whether among towboat crews operating in rivers or railway crews.

“Port labor, longshoremen labor has certainly had plenty of people sick in various ports, but they’ve been able to manage it, stevedoring companies have been able to manage it fairly well,” Posner said.

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Elsewhere, Posner said he has seen disruptions related to mine closures in the U.S. and Canada, in addition to the ripple effect from the approximately two-month closure of automotive production.

Earlier this month, automotive parts suppliers got a week’s head start before the Detroit Big 3 restarted May 18. However, illustrating the challenges of a manufacturing environment in the time of COVID-19, two Ford plants — one in Chicago, another in Dearborn, Michigan — temporarily closed last Wednesday after workers tested positive for the coronavirus, the Detroit News reported.

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