Stormy Weather Ahead: A Global Outlook on the 2019 SeasonEverstream Team
- During the upcoming tropical storm season in the Northern Hemisphere, companies should brace for up to 4 major hurricanes in the Americas and 10 major typhoons in East Asia, according to storm forecasts.
- Common storm paths and past landfalls reveal that parts of the United States, China, Japan, and India are particularly at risk of impact from storms, as was highlighted by Cyclone Fani in May 2019, the strongest storm of the season so far.
- In the Americas, Florida’s exposure to passing hurricanes and subsequent flooding poses significant supply chain risks as many manufacturing plants, particularly of aerospace and defense companies, are located near the shoreline or in the immediate hinterland.
- In East Asia, Everstream Analytics’s database of suppliers and logistics hubs indicates that automotive, electronics, and engineering supply chain locations in China’s Pearl River Delta, south of Shanghai, and in southwestern Japan fall within the reach of most common trajectories for typhoons and regularly face secondary impacts such as flooding and power outages.
- With most cyclones making landfall in northeastern India and Bangladesh, pharmaceutical and automotive clusters as well as ports near Visakhapatnam, Kolkata, and Chittagong are most likely to experience disruption from storms in the North Indian Ocean.
- To mitigate potential disruptions ahead of the storm season, the report provides a series of short and long term recommendations. These include monitoring weather events in near real-time, identifying and diversifying key suppliers in areas vulnerable to storm paths, and developing business continuity plans for key locations and shipping routes.
What’s in a Name?
The southern hemisphere is still reeling from the impact of major back-to-back tropical storms that hit the coast of Mozambique in March and April this year. At the beginning of May, a powerful storm made landfall in India, shutting down ports and airports for days that left thousands of containers stranded at gateways including India’s Visakhapatnam and Bangladesh’s Chittagong ports. With these storms already having made their mark, risk managers and logistics operators in the northern hemisphere are currently preparing for the start of the 2019 storm season.
The North Indian Ocean cyclone season usually runs between April and December, with two peaks in May and November. In the Americas, the new hurricane season will officially start on June 1 and run through November, with its peak extending from August to October, while in East Asia the typhoon season has officially begun on May 1 and ends in October.
In this report, a ‘tropical storm’ is defined as a rapidly rotating storm system characterized by strong winds and heavy rain. Depending on its location and strength, a tropical storm is referred to by different names. In the Atlantic Ocean, tropical storms are called hurricanes while in the northwestern Pacific Ocean they are usually referred to as typhoons. In the Indian Ocean, comparable storms are named tropical cyclones or cyclonic storms.
A storm’s strength is classified into five categories using the Saffir-Simpson hurricane wind scale (SSHWS). The highest classification on the scale, Category 5, consists of storms with sustained winds over 156 mph (251 km/h). The classifications can provide some indication of the potential damage and subsequent flooding that a hurricane will cause upon landfall.
Predicting the 2019 Season
A number of meteorological agencies provide forecasts on the likely number of tropical storms which could develop in a particular region during the season. The forecasts take into account the El Nino weather phenomenon as well as the setup of ocean temperatures. While these are often accurate, they cannot forecast the strength and frequency of such storms. No storm outlook predicted the powerful back-to-back hurricanes which developed in the Americas in the autumn of 2017. Forecasts thus should be taken with a pinch of salt and it is important to note that outlooks do not attempt to determine where and how many storms might make landfall, which usually causes the most damages.
Americas: Bracing for Impact
The early April outlook by scientists at Colorado State University for the 2019 season predicts a slightly below-average season, as ocean temperatures in the tropical Atlantic, where strong hurricanes tend to form, are cooler than average. The season is forecast to produce five hurricanes, of which two will become Category 3 hurricanes or higher. About 95 percent of all major hurricanes occur after August 1 and the season peaks around September 10. A below-average season does not mean, however, that hurricanes will have less impact on supply chains as it only takes one devastating storm for risks to materialize. Private forecasters predict a slightly above-average season, including Accuweather which predicts 5-7 hurricanes, and The Weather Channel, which anticipates 7 hurricanes. Forecasts will generally be updated in June, July, and August and tend to get more accurate closer to the peak of the season.
East Asia: already a record season
On May 7, Tropical Storm Risk (TSR) issued its first forecast for the season, predicting that the 2019 season would be slightly above-average and could produce 17 typhoons, of which 10 could be Category 3 typhoons or higher. Even before the season officially started, two records have already been broken. Pabuk, the season’s first named storm, became the earliest-forming tropical storm of the Western Pacific Ocean on record. Wutip, the season’s first typhoon, became the strongest tropical storm recorded in February in the Northern Hemisphere.
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Besides the TSR forecast, two national meteorological services have published seasonal forecasts on typhoon activity within their territories. According to the Hong Kong Observatory, around four to seven tropical cyclones are expected to approach Hong Kong within 500 km this year. The Philippines’s National Meteorological and Hydrological Services agency predicts that two to four typhoons could develop or enter its territory between April and June.
North Indian Ocean: The Worst May be Over
No official forecasts are typically released for the North Indian Ocean Cyclone season. The region experiences between three to four cyclonic storms per year. In early May, Cyclone Fani made landfall in India’s Odisha Province, the strongest cyclone to reach India in 20 years, causing more than 1 million people to evacuate and shutting down logistics hubs for several days.
Common Trajectories of Storms
Americas: Disturbances Originating off Africa’s West Coast
Tropical storms which affect the Americas and become hurricanes often form in the central or eastern Atlantic from disturbances and tropical waves off the northwestern coast of Africa. Once these storms approach the Caribbean Sea, they typically take one of three paths displayed in Figure 3 below.
Path 1 resembles the trajectory that Hurricane Harvey took in 2017, crossing the western Caribbean and Yucatán Peninsula before making its way through the Gulf of Mexico. Hurricanes following path 2 usually track further northwards across the Caribbean islands before reaching southern Florida. Hurricanes can also form in the Gulf of Mexico or the Caribbean Sea, often taking a more direct passage towards the US coastline, in particular Florida, as displayed in path 3. Last year’s Hurricane Michael roughly followed this trajectory when making landfall in northwestern Florida. And finally, an example for hurricanes taking path 4 was Hurricane Chris in 2017. Forming in the south of Bermuda, the storm bypassed the Florida peninsula before tracking further northwards along the US East Coast without making landfall.
East Asia: Three Typical Typhoon Trajectories
Based on historical storm records, three typical storm trajectories can be identified in the Western Pacific Ocean. Storms usually develop in the Philippines Sea before taking one of the three paths outlined in Figure 4 below. Along these paths, the Philippines, Taiwan, Vietnam, South Korea, Japan, and China generally experience the most disruption from the storms and its associated impacts.
Path 1 normally moves in a west-northerly direction curving towards the East China Sea and later the Korean peninsula and Japan, in particular during the peak typhoon period from July to October. In 2018, Typhoon Jebi roughly followed this path. The majority of storms on this track generally makes landfall in the Japanese islands of Kyushu, Shikoku and eastern Honshu. Typhoons moving along path 2 usually pass through or by Taiwan, such as Typhoon Maria in 2018, and often continue to move towards China’s southeast or eastern provinces including Hong Kong, Guangdong, Fujian, Jiangxi, Zhejiang, and Jiangsu. At times, the storm can curve upwards towards the Korean peninsula affecting China’s northeastern seaports or towards the Sea of Japan.
Southeast Asian countries including the Philippines and Vietnam usually experience most disruption from typhoons following path 3. These storms cross over the Philippines and normally make landfall in central Vietnam before moving further inland. The outer bandwidth of the storm can occasionally affect Hong Kong, Macau, and Shenzhen as well. This route resembles the one Typhoon Mangkhut took in 2018 when making its first landfall in the Philippines and its second near Shenzhen in southern China.
North Indian Ocean: East Coast of India Susceptible to the strongest Cyclones
Cyclones in the North Indian Ocean can develop and travel between the east of the Horn of Africa to the west of the Malay Peninsula via the Arabian Sea and the Bay of Bengal. The cyclone season has two peaks of activity: the first one in May and the second one in November.
During spring, tropical cyclones tend to develop in the Bay of Bengal and are often carried east or northeast along the Indian coast into Bangladesh and Myanmar, as displayed in path 1. Earlier this month, Cyclone Fani roughly took such a trajectory when it made landfall in India’s Odisha region before moving towards Bangladesh. In 2018, Cyclone Mekunu also formed during the first peak in May, but originated in the Arabian Sea before moving ashore in Oman, roughly following path 2. After a period of little cyclone activity in the summer, the strongest cyclones to affect India often occur during the second peak, typically taking path 3. Last year’s very severe cyclonic storm Titli developed off the coast of Thailand before moving towards the Indian east coast. Between 2000 and 2019, more than 80 percent of cyclones in the North Indian Ocean with equivalent strength to a Category 3 hurricane or higher made landfall on the east coast of India.
Vulnerable Areas and Industries at Risk
Americas: All Eyes on Florida
As shown in Figure 6, there were 19 hurricanes of Category 3 or higher that made landfall in the Atlantic Ocean between 2000 and 2018, including in the Gulf of Mexico and the Caribbean Sea. Among the countries most affected by landfall-making hurricanes were the United States, Mexico, and some of the Caribbean islands. Most hurricanes came ashore in Cuba, the US state of Florida, the Bahamas, and Mexico’s east coast. Other countries and US states which have experienced major hurricanes include Puerto Rico, Texas, Louisiana, Mississippi, and Alabama.
During the Atlantic hurricane season, Florida’s unique geographic position makes it particularly vulnerable to impacts from passing storms. Three out of four common trajectories typically have the potential to impact the state’s east or west coasts. In the last 20 years, Florida’s west coast has been hit by 4 major hurricanes. Two of those storms hit Florida in the last two years, namely Hurricane Irma, which made landfall near the Florida Keys in 2017, and Hurricane Michael, which devastated Panama City in 2018.
Manufacturing Clustering and Logistics Hubs at Risk
As many manufacturing clusters and ports or airports are located near the shoreline or in the immediate hinterland, Florida’s exposure to passing hurricanes and subsequent flooding poses significant supply chain risks. On the one hand, the state hosts several industrial centers that may experience outages during a powerful storm event. Everstream Analytics’s database of suppliers indicates that Florida has several clusters of engineering suppliers located on coastlines in the northwest near Pensacola, around Tampa and in the southeast near Miami, producing parts for customers in the aerospace, automotive, and machinery industries. In addition, many suppliers and distribution centers of technology and medical device makers are located near Miami International Airport, stretching north up to Palm Beach. This is in part due to the airport’s key position as the gateway to Latin and South America as well as the Port of Miami, a key import hub for fresh supply chains and an export hub for electronics, machinery, and automotive parts. Any disruption to either hub may cause ripple effects through not just national but also international supply lines.
However, other manufacturing hubs may also occasionally experience the impact of hurricanes in the form of power outage and damage from wind or flooding, which may lead to operational down times. Most notably at risk are petrochemical plants in Texas as well as factories producing pharmaceutical goods and medical devices in Puerto Rico. The latter was severely hit by Hurricane Maria in 2017, disrupting production and critical medicine supply for months. Maria was the first Category 5 hurricane to hit Puerto Rico since 1928, highlighting why areas with less common landfalls should also prepare for potential impact and have business continuity plans in place.
While production outages can cause significant financial losses, disrupted logistics hubs can have an equally damaging impact on supply chains. Hurricanes moving across the Caribbean towards the United States often cause container gateways along their path to shut down temporarily. These include the US ports of Houston, Mobile, Miami, and Charleston as well as Freeport in the Bahamas, a key transshipment hub in North America. Although located in an area which is typically spared from hurricanes, container terminals in Norfolk, Virginia, preemptively closed down ahead of Hurricane Florence’s landfall in North Carolina last year.
East Asia: Tech Supply Chains at Risk
In the Western Pacific Ocean, 16 typhoons of Category 3 or higher made landfall between 2000 and 2018 on the coastlines of China’s Guangdong, Guangzhou, Zhejiang, and Fujian provinces as well as in Japan’s Kyushu, Shikoku, and Honshu islands, as shown in Figure 8 below. However, strong typhoons have also made landfall on rare occasions as north as Ofunato, Iwate Prefecture, in northern Japan as well as west of Busan in South Korea.
Manufacturing Clustering and Logistics Hubs at Risk
According to Everstream Analytics’s database of suppliers, electronics and engineering clusters in the industrial center of the Pearl River Delta in Guangzhou Province are particularly exposed to passing storms and secondary impacts such as power outages and flooding as two out of three of the most common trajectories have the potential to come within striking distance. However, other industrial centers are also at risk of potential typhoon impacts if they are located in coastal areas or in the nearby hinterland. For instance, automotive clusters south of Shanghai in China’s Zhejiang and Fujian provinces are particularly at risk of the impact of landfall-making typhoons. In total, four major typhoons have made landfall in both regions in the last 20 years. Similarly, semiconductor, electronics, and automotive suppliers in Japan’s Kyushu, Shikoku, and Chugoku regions in the southwest are located in one of the most common trajectories for typhoons and regularly face impacts such as flooding and power outages. Although located in a low-risk zone for typhoons, Dalian Fujia chemical plant in China’s northeastern province of Liaoning experienced significant damages from wind and storm surges in 2011.
These common trajectories and areas of landfall in China and Japan also host a number of logistics hubs whose disruption would have immediate impacts on just-in-time manufacturing supply chains. Both Shanghai Pudong Airport and Hong Kong International Airport were among the top 3 of the world’s busiest airports in terms of cargo throughput in 2018. Similarly, Osaka’s Kansai International Airport, the country’s third largest airport, is a key hub for engineering and automotive companies from southern and central regions of Japan. In 2018 during Typhoon Jebi’s passage, numerous Japanese companies including Renesas had to reroute shipments from its nearby plants to Tokyo’s Narita airport when Osaka airport was entirely closed for at least 3 days. Supply chains relying on ocean freight should also watch out for regular typhoon impact on major Asian container gateways which can cause weeks of congestion and delays. Among ports most frequently disrupted by storms in East Asia are China’s east coast ports in Shanghai and Ningbo, as well as Japan’s ports of Kobe and Nagoya. Knock-on effects have also been reported in Southeast Asia where delayed container vessels congested the Port of Manila for several weeks during previous storms.
North Indian Ocean: Pharma and automotive clusters vulnerable
As shown in Figure 11 below, five major cyclones made landfall on the eastern coast of India as well as in Bangladesh between 2000 and 2019. No major storms made landfall on India’s west coast, where the Jawaharlal Nehru Port Trust, its largest container gateway, is located. In addition, three powerful cyclones have hit Oman since the year 2000, one of which devastated Salalah, a major transshipment hub in the Middle East. On one occasion, Myanmar’s Yangon was also directly hit by a powerful cyclone.
Despite the relatively wide impact area of cyclones in the North Indian Ocean, two out of three common trajectories have a high chance of impacting the coastline in northeastern India or Bangladesh. In the last 20 years, the coastal stretch between Visakhapatnam in India and Barisal in Bangladesh has experienced four major storms. The last major storm to make landfall in this area was Cyclone Fani in early May 2019.
Manufacturing clusters and logistics hubs at risk
The common area of landfall between Visakhapatnam in India and Barisal in Bangladesh mainly hosts two different manufacturing hubs which can be considered at risk. The area around Visakhapatnam is a well-known pharmaceutical cluster with plants of Aurobindo and Divi’s Laboratories, two of India’s largest drug makers. Further north, Kolkata has a thriving automotive industry which is led by Tata Motors, India’s largest auto manufacturer that has built a plant in Jamshedpur west of Kolkata. Traditionally, key suppliers in the automotive industry will also set up factories in close proximity of the OEM’s plant.
Both clusters are in close proximity to 2 out of India’s 12 major public ports, namely Visakhapatnam and Kolkata. In particular Kolkata, as India’s 10th largest container port, is a major gateway into northeastern India as well as Nepal and increasingly functions as transshipment port for shippers across the border in Bangladesh to avoid chronic congestion in Chittagong, the country’s major import and export hub for garment shipments, among others. In early May 2019, Cyclone Fani highlighted the areas’ vulnerability, causing multi-day port closures and forcing companies operating in northeastern India and Bangladesh to turn to air freight to meet delivery schedules.
A Lookback on 2018: A Whirlwind Year
Across all regions of the northern hemisphere, 2018 was a season with above-average tropical storm activity. In the North Indian Ocean, the cyclone season was the most active since 1992. In the Americas, the hurricane season was the third consecutive above-average season, while in East Asia it was the first above-average season since 2015.
Hurricanes Florence, Michael shut US ports and factories
In the Americas, the Atlantic hurricane season was the third consecutive above-average season featuring 8 hurricanes that caused USD 50 billion (EUR 44.74 billion) in damages. The two strongest storms were Hurricane Florence and Hurricane Michael. Florence was the wettest storm on record when it made landfall near Wilmington in September, disrupting container ports in Norfolk, Charleston, and Wilmington. Several car and aircraft makers in South Carolina halted operations as precaution.
A month later, Hurricane Michael was the first Category 5 hurricane on record to reach the continental United States, causing USD 25 billion (EUR 22 billion) in damages in northwestern Florida. Container terminals as far away as Savannah experienced severe congestion as ships lined up outside of ports up until 10 days after the hurricane’s landfall. To prevent damages, some equipment manufacturers and chemical companies reportedly closed factories for at least one day.
Gateways in Hong Kong, Kobe disrupted by typhoons
Last year’s typhoon season produced 13 typhoons, and 7 super typhoons that disrupted supply chains from Hong Kong to China to Japan between July and September. Throughout July and August, container gateways in Hong Kong and Shanghai were forced to intermittently shut down port operations as a series of storms made landfall near the Yangtze delta. Many vessels lined up at ports waiting to berth, with knock-on congestion being experienced as far as the Port of Manila in Southeast Asia.
A month later, the most powerful storm to make landfall in Japan in 25 years disrupted industrial supply chains relying on major air and ocean gateways in the center of the country. As airports and ports around Osaka and Kobe preemptively closed ahead of the storm’s arrival, congestion issues caused delays for up to three weeks after the storm. In addition, auto and semiconductor equipment makers preemptively halted production lines for several shifts.
A few days later, another typhoon called Mangkhut made landfall first in the Philippines and then in southern China near Hong Kong, causing financial losses of up to USD 32 billion (EUR 27.2 billion). Hong Kong International Airport, one of the world’s busiest air cargo hubs, was disrupted for days and had to clear thousands of shipments in backlog after canceling more than 600 flights, while sea ports and factories in the Pearl River Delta area shut down operations for more than 24 hours.
Cyclone Mekunu damages transshipment port
Further south, the 2018 North Indian Ocean cyclone season was the most active since 1992, with the formation of seven cyclones. The most impactful cyclone to affect this region was Cyclone Mekunu which made landfall in May 2018 near the port city of Salalah in Oman. The cyclone brought more than two years of rain on a single day, shutting down a major transshipment port in the Gulf of Aden for more than 72 hours. Maersk Line diverted more than 16 vessels to ports as far away as Jeddah in Saudi Arabia and Colombo in Sri Lanka, causing weeks of container delays.
What Businesses Can Do to Prepare
As the season for both hurricanes and typhoons will commence in May and June, Everstream Analytics customers should stay abreast of weather developments at least until the peak season subsides in November. As disruptions are inevitable during and after the storm’s passage, the following short and long term mitigation measures can help to prepare for the upcoming season.
Short term measures
- Monitor near real-time updates on storm forecasts: Established national and regional meteorological agencies regularly provide forecasts and timely alerts on developing storms. Supply chain managers can receive advanced warnings to proactively initiate mitigation plans ahead of a storm’s arrival. Monitoring weather alerts also allows ample time to assess potential impact areas, align with suppliers, plan productions, and schedule shipments accordingly.
- Identify key suppliers in areas vulnerable to storm paths: As part of a proactive approach, customers should know which links in their supply chain are likely to be exposed to common storm trajectories and landfalls. This will help prioritize when planning mitigation efforts. Organizations should also consider alternative routes to and from production sites to warehouses and transport hubs, and identify priority shipments early on.
- Stock up on inventory: Varying storm intensities may bring unexpected disruptions, and as such, organizations can increase inventory to prepare for infrastructural or road damage near manufacturing sites and severe flooding on roads, which may make it difficult to transfer goods. Customers in pharmaceutical and consumer industries may want to relocate temperature-sensitive or perishable goods to an alternative location to minimize product damage and loss.
- Set up emergency communication systems: Companies must plan for the possibility of extended power outages during and in the aftermath of a storm; in emergency situations, customers should have back-up communication channels in place to communicate with their employees and suppliers using CB radio. Charging all communication devices ahead of time, keeping extra batteries on hand, storing fuel, and setting up backup generators are also sensible measures to adopt ahead of a storm.
Long term measures
- Test business continuity plans ahead: In the event of an emergency, organizations should make sure to have documented business contingency plans in place and ensure that all employees understand how to respond to a disaster. It is important for business continuity plans to be tested by all relevant parties to understand any gaps and weaknesses well ahead of the storm season.
- Use mapping tools for supply chain visibility: Organizations are encouraged to use mapping and survey tools for supply chain transparency, and understand the interdependencies within their logistics networks. Survey capabilities will also enable organizations to understand whether their suppliers have business continuity plans in place and where alternative supplier locations can be used in the event of a disaster.
- Diversify supplier & manufacturing locations: Companies can consider diversifying supplier, manufacturing, and distribution locations as part of their overall supply chain risk management strategy. In the event of an emergency, having alternate locations on standby will minimize the likelihood of a complete production halt or distribution suspension.
- Establish good supplier relationships: Having strategic supplier relationships with logistics providers is useful as they can be the source of on-the-ground intelligence. Strategic suppliers can also help to understand capacity constraints and formulate plans to move cargo during a disaster.