Katrina Slams Largest U.S. Port, Affecting Flow of Oil, Steel

Aug. 29, 2005 — -- If you're a farmer in Pennsylvania or the Dakotas, chances are that much of the grain you grow will be sent by barge down the Mississippi -- right through the path of Hurricane Katrina.

Likewise, if you live in Illinois or Tennessee, and you're trying to buy a car, there's a good chance the steel for its frame and the rubber for its tires were shipped from overseas, coming up the Mississippi in the other direction.

The Port of Southern Louisiana is the largest in America and the fifth-largest in the world -- only Singapore, Rotterdam, Shanghai and Hong Kong are bigger. By tonnage, fully a quarter of America's exports pass right through the disaster zone.

"It's a little-appreciated fact that New Orleans is one of the most strategic cities in the United States," said George Friedman, chairman of Stratfor, Inc., a firm that provides economic and intelligence analysis to private companies. He said he worries that Katrina might have churned up so much silt that the Mississippi will have to be dredged.

Billions in Damages, Possible Disruption to Entire Economy

"It doesn't matter where the river is blocked," he said. "You could wind up with some serious grain shortages around the world, where U.S. farmers can't get to market. That doesn't mean it's happened; we just don't know. But that is the No. 1 threat, not oil."

On the Chicago Board of Trade, the hurricane drove prices up on everything from beef to soybeans. Prices rose 1 percent to 4 percent, while traders waited nervously for information on how much damage Katrina caused.

Early estimates said damage from Katrina might be between $10 billion and $25 billion -- a number that might have been much higher if the storm had hit New Orleans directly. Historically, insurance and government aid cover about three-quarters of the losses.

But time is money, and nobody knows how much time will be lost because the lower Mississippi was closed.

"Exports, imports -- a lot of that occurs through the Louisiana ports," said Mark Zandi, chief economist for the Web site Economy.com. "If that's disrupted for any significant period of time, then that's going to disrupt the entire U.S. economy."

Meanwhile, consumers are likely to feel the effects in subtle ways. The price of produce could rise; some products may take longer to reach customers. Economists say they have seen similar effects when smaller ports were closed.

What's more, nobody knows how long it might take to get commerce back to normal. It could be hours, or it could take weeks. And the timing -- with consumer confidence unsteady, oil prices high, and the fall harvest coming -- is terrible for the nation.