Unprecedented Bushfires in Australia Impact
Infrastructure and Local Supply Chains

Unprecedented Bushfires in Australia Impact
Infrastructure and Local Supply Chains

Executive Summary

  • Over 6.3 million hectares of forest and parks across the country has burnt, as Australia faces one of its worst bushfire seasons on record since it started in September 2019, killing 28 people and destroying 2,500 homes. 
  • The total damages and economic losses from the wildfires are estimated to be around USD 110 billion (EUR 98.6 billion) due to losses incurred from highway closures, production stoppage, power outages as well as flight cancellations and delays.
  • New South Wales (NSW), Victoria, and South Australia are experiencing the most disastrous effects of the fires; the rest of the country including Queensland and Western Australia (WA) are also impacted.
  • While major seaports and airports remain operational in Australia, domestic ground shipping to notable seaports has been visibly impacted. Interstate highway closures in WA and along the state borders of NSW and Victoria have also caused overland disruptions to transportation and logistics. 
  • The bushfire’s impact has largely caused a 3.4% dip in Australian dairy production in November 2019 compared with 2018, while the nickel mining industry in Victoria faces temporary operational suspensions due to power outages from the fires’ impact. Coal exports face broader questions around its viability and its role in contributing to climate change. 
  • According to the Australia Bureau of Meteorology (BoM), warmer temperatures are expected in the coming weeks, indicating that this may exacerbate a new risk of bushfires due to high winds.
  • Those with supply chain operations in Australia are advised to create visibility through mapping of vulnerable suppliers and transportation lanes, monitor weather forecasts, be mindful of seasonal conditions, and plan both production and transportation capacity ahead.

Background

The recent bushfires in Australia have killed at least 28 people, burned  27 million hectares of forest and parks and destroyed over 2,500 homes due to unprecedented conditions that broke out since September 2019. The summer of 2019 was reportedly the driest and hottest year on record which may have exacerbated the fire conditions. It is being regarded as one of the worst bushfire seasons on record by the NSW Rural Fire Service (RFS).

As of this writing, the bushfires continue to burn, particularly in parts of the eastern states including New South Wales (NSW), Queensland, Australian Capital Territory, and southern states including South Australia and Victoria. Western Australia also faces some bushfires. Batemans Bay in NSW, Sale, the Alpine and East Gippsland in Victoria and South Australia have seen the most disastrous effects.  

An image from MyFireWatch depicts the current active wildfire hotspots across Australia as fires continue to devastate large parts of the country. The hotspots on the map are being updated on an hourly basis.    

Figure 1: Live map of bush fires across Australia; image captured on January 27. Source: MyFireWatch

International awareness to the bushfires began in early November 2019, when the Greater Sydney region declared ‘catastrophic fire danger’ (the highest danger level on a six-tier scale) for the first time since this level was introduced in 2009. A total fire ban was also issued for seven regions in NSW, including Greater Sydney. 

At present, the total damages and economic losses from the wildfires from September 2019 into early 2020 are estimated to be around USD 110 billion (EUR 98.6 billion), including losses incurred from highway closures, production stoppages, power outages as well as flight cancellations and delays. The increased fire activity has prompted closures of major thoroughfares at intercity and interstate levels, disrupting logistics and transportation activities in the consumer and mining sectors. 

Impacts of the Bushfires on Transportation

New South Wales 

New South Wales remains one of the more profoundly impacted states as of this writing, as 77 fires remain burning and 20 are yet to be contained. Originating in the Snowy Valleys near the Victoria state line in mid-November, these fires, as well as those in Gospers Mountain and Currowan State Forest, led to smoky conditions throughout the state, some of which resulted in a work stoppage at the Port of Sydney due to occupational health concerns. The fire of note that sparked the most recent conditions was the Green Wattle Creek fire of December 5, causing considerable edificial damage, fatalities, and evacuations in the Sydney metropolitan area. 

An additional fire underway since late October around Lake Burragorang surpassed the lake around December 5, causing logistics disruptions along the Hume Highway. Moreover, the Currowan fires caused interruptions in traffic movement along the Princes Highway. Furthermore, by December 26, the Clyde Mountain fire had created impediments along the Kings Highway as well.

Inter-city and inter-state highways and other major roads in NSW faced partial closures for several days and weeks due to low visibility from fires. The following roads have experienced closures and have either reopened or continue to be disrupted: 

  • The Princes Highway temporarily reopened on January 19 until 20:00 (local time) to allow communities to travel to and from the Cann River
  • The Upper Lachlan Shire Council has seen the closure of Bannaby Road, New Foundland Road, Mares Forest Road, Hanworth Road, Adavale Road, and Brayton Road
  • Access to the Tallowa Dam has been impeded due to fires
  • The Monaro Highway which stretches from Victoria, ACT and NSW has reopened
  • The Murray Valley Highway connecting Victoria and NSW has reopened 

Some of the more notable impact of the bushfire season has been the disruptions at Sydney’s ports since December 2019. Port Botany and Patrick Terminal have been the most affected, with berthing delays at the ports reaching 60-hours at one point. Furthermore, fires in the Port Macquarie area have proven to be the most visible, as well as impactful, in the Sydney metropolitan area. 

Sydney Airport, in contrast, has experienced minimal fire-related disruption, if any, through the duration of the December-January phase of the season. Regional Express Airlines grounded all of its services to and from Clarence Valley Regional Airport (also known as Grafton Airport) in NSW for two days. As for rail transport, a combination of visibility and navigability impediments has delayed freight transport in the state for up to 48-hours.

Victoria 

At least five people have died while about 400 homes have been destroyed by the bushfires in Victoria State as of mid-January. As of January 19, 14 fires continue to burn in the state. New evacuation warnings were issued for Buffalo Creek, Merriang and surrounding areas while emergency warnings were issued for the Buffalo River and Nug Nug areas at 19:30 (local time) on January 17. As of January 21, 27 emergency warnings remain in place. 

Major highways across Victoria have faced intermittent closures from the  fire activities as well as from the recent heavy rainfalls. The Great Alpine Road was closed between Ensay and Bruthen as heavy rains washed fire debris on to the road. Sections of the road have been facing intermittent closures since January 3. Other closures include interstate highways like Murray Valley HighwayMonaro Highway, and sections of Princes Highway from Mogo to Batemans Bay, which have now been reopened. Intermittent power outages were also reported on January 4. 

As of January 15, the bushfire haze has led to poor visibility resulting in more than 50 flight cancellations at Melbourne’s Tullamarine Airport on Qantas, Jetstar, Virgin Australia, Emirates, and China Airlines. The cancellations, however, did not apply to international flights due to air traffic control landing prioritization. The city has borne much of the brunt of Victoria’s bushfire haze as of this writing.

Queensland 

The bushfires in Queensland have been occurring since September 2019. On January 10, the Queensland Fire and Emergency Services (QFES) extended a local fire ban for North Coast Region residents. The fire ban will remain effective until 07:00 local time on January 27 in the North Burnett, South Burnett, Cherbourg, Gympie, Fraser Coast, Bundaberg, Noosa and Sunshine Coast Local Government Areas. The ban means that all open fires are prohibited and all permits to light fire which have been issued in the designated areas have been canceled. 

Thick haze caused by the bushfires in Queensland prompted closure of several roads and affected inbound and outbound flights out of Rockhampton Regional Airport. Train delays have also been reported. 

Western Australia 

While some of the earlier, persistent bushfires of the year were recorded around Yanchep and Two Rocks on December 11, the most notable of the fires in Western Australia broke out as a result of a lightning strike in Stirling Range National Park on December 26.

A notable rail transport impediment in Western Australia has been the closure of the iron-ore shipping line from Kalgoorlie to Esperance. The most significant ground transportation disruption in the state, however, has been the bisection of the Eyre Highway, which cut off the highway connection to Western Australian from the rest of the country for 12-days. This disruption has been depicted in the form of trucks idling in smaller Western Australia towns whose ordinary commerce and rotation between Perth and Adelaide has been disrupted. Impacted locations include Salmon Gums, where trucks with perishable shipments have been forced to sit idle in rest areas, testing the limits of the trucks’ refrigeration capability for perishable cargo.

South Australia 

Notable fires broke out across South Australia during November 2019, but the one that persists to this day ignited on December 20 in the Adelaide Hills and near Cudlee Creek in the Mount Lofty Ranges. These fires have caused notable disruption along the Northern Expressway. The most considerable damage, however, is on Kangaroo Island, 70 miles south of Adelaide, where 170,000 hectares of vegetation has burnt. 

The most significant road disruption, however, is the cut-off of the 1,675-kilometer long Eyre Highway, impeding traffic between South Australia and Western Australia. In a similar manner to road-based cargo transportation in Western Australia, those shipments bound westward in South Australia have been stranded.  Aside from this highway, local roads have seen relatively minimal disruption.

Impact on industries

Food & Beverage Sector

The effects on the food and beverage industry have been most profoundly felt in Western Australia, where the cut-off of the Eyre Highway has adversely impacted the domestic delivery of food and beverage cargo to Woolworths and Coles, among other retailers, in the Perth metropolitan area, the population anchor of the state. 

Meat & Livestock Australia estimates that 20% of Australia’s national cattle herd as well as 30% of the national sheep flock are believed to be impacted. Moreover, the earliest figures of the bushfire impact, in November 2019, showed a 3.4% dip in dairy production compared with the previous year, a portion of which was attributable to the fires. Production operations remain stable, however. The predominant issue for the industry will be transport, as outlined by the impediments described in the earlier section.

The fires have also had a considerable impact on the foodstuffs production supply chain. Victoria, a center of milk production, generates about one-third of Australia’s milk production. However, the bushfires in the state is expected to have killed a large number of livestock resulting in the loss of AUD 3.3 billion (USD 2.36 billion; EUR 2 billion). However, the full impact to the land and the livestock will not be known until the bushfires subside and areas are safe to access.

Similarly, New South Wales is noted in the industry for its dairy processing facilities. Infrastructure destruction faced by Bega Cheese, headquartered in the state, threatens to impact the company’s output by 1.9 million liters. Other examples include the loss of 200 tons of crop, estimated to be half of total output, of the Winemaker Australian Vintage vineyard in Adelaide Hills, SA. 

Such impacts not only have bearing on the domestic market, but also for those in East and Southeast Asia dependent on Australian agricultural exports. Examples such as these illustrate the challenges that supply chains as a whole face from the bushfires and those that will continue to come to the forefront as the impacts from the devastations are further assessed.

Export Sector

While Australia’s major seaports and airports remain operational, domestic ground shipping to notable seaports remains a challenge, as indicated by earlier accounts of highway and railway blockages due to the fires, making access to Sydney, Melbourne, Brisbane, and Perth difficult. 

One object of concern for Australian exports throughout the season has been coal. Australia is one of the world’s largest coal exporters, exporting 290.6 million tons in the first 9 months of 2019. Queensland, in particular, is home to most of Australia’s coking coal exports. While Prime Minister Scott Morrison has ruled out the possibility of halting coal exports as part of an official review of the bushfires, such a review may result in increased scrutiny for coal exports in the future.

Aside from their immediate export considerations, some of these metallurgical coal mines are now being discussed in light of their broader contribution to climate change. Carmichael coal mine, operated by the Ahmedabad-based Adani Group in partnership with Siemens, has recently experienced a public backlash regarding potential emissions contributions from the mine. As a result, Siemens has ceded to an internal review and a potential re-evaluation of its role in the operation of the mine. As the fires begin to subside, further review of metallurgical coal mines and their potential links to climate aggravations resulting in intensifying bushfires may contribute to strategic challenges to commodities firms as well as manufacturers sourcing from such mines.

The broader implications of a coal-driven export economy notwithstanding, existing operational challenges are already evident form the current bushfires. BHG Group reported that smoke and dust from the bushfires are affecting air quality at its coal plants in NSW. According to the company’s statement, machines are forced to operate slowly due to reduced visibility and employees have had to leave work to protect their homes from the fires. The firm warns that if the conditions continue, operations are likely to be constrained in the second half of 2020.  

Mining locations that have been impacted by the bushfires include the Forrestania nickel mine in Western Australia, which had its operations suspended due to the fires’ impact on nearby power lines. Power interruptions due to lack of cable and tower resiliency against fire threats remain one of the major risks to raw material production caused by the bushfires. 

Finally, for materials sensitive to elemental changes, fires can pose a risk to the raw material itself as well as the facilities extracting and processing them, with gas serving as one example. One impacted site of note was the APA Group’s Cooper Energy Sole gas field in East Gippsland, VIC, which had its production halted for 2-weeks due to the encroaching threat of fires. 

Intensifying wildfires

The current bush fire season has been devastating compared with the previous ones due to two factors: extreme heat and record-breaking dryness in 2019. The country experienced its hottest year on record with average temperatures of 1.52 degrees Celsius above the 1961-1990 average record. The second hottest year was 2013 followed by 2005, 2018, and 2017. 

NSW, the most affected state from the fires, broke the record with temperatures 1.95C above the 1961-1990 average, compared to the previous year’s record of 0.27C. Apart from the heat, 2019 was also the driest year for Australia with rainfall 40 percent lower than average based on the records dating back to 1900. NSW, similarly, also faced the driest season. The upward trend of extreme heat from 2017 to 2019 indicates that warming temperatures are on the rise due to rising levels of greenhouse gases in the atmosphere which changes the earth’s radiation balance, allowing less heat to escape. This means that catastrophic seasonal bushfires may become the norm. 

A trend towards more dangerous bushfires in Australia is backed by a study from 2017. In the study evaluating 67 years of forest fire danger index, scientists detected a trend towards more dangerous conditions during spring and summer in southern Australia such as increased frequency and magnitude of extremes, thus indicating an earlier start to the fire season. This trend was evident when the bushfires started in September 2019. Scientists relate this upward trajectory to be linked with man-made greenhouse gas emissions. 

Figure 2: Global warming progression. Source: The World Meteorological Organization

Based on its findings on analysis of various international datasets such as the Japan Meteorological Agency (JMA), National Oceanic and Atmospheric Administration (NOAA), and the National Aeronautics and Space Administration (NASA), the World Meteorological Organization (WMO) indicates that increases in global temperatures is also evident through the melting of ice glaciers, rising sea levels, increasing ocean temperatures, and extreme weather. As depicted in Figure 2, 2019 was the hottest year on record and WMO warns that higher temperatures are expected to fuel numerous extreme weather events in 2020 and beyond. 

Under the Paris climate agreement, Australia has pledged to cut emissions by 26% to 28% by 2030 compared to 2005 levels. However, Prime Minister Scott Morrison and his government are facing widespread criticism in its handling of the current bushfires and its response to tackling climate change. A series of climate change-related protests have occurred since late November 2019 across urban centers in Australia, attended by tens of thousands of people demanding to press the government to make a quick transition away from fossil fuels, to increase funding and support for firefighters and communities affected by the ongoing bushfires in Australia, and other policies to address climate change.

While parts of NSW, ACT and Victoria received rainfalls up to 47 mm in mid-January, the fires have not fully been extinguished though the rain has helped to control it from spreading further. However, adverse weather conditions such as destructive hails in Canberra, damaging winds and flash flooding in NSW and Victoria have been reported. The Great Alpine Road between Ensay and Bruthen was temporarily closed after heavy rains washed fire debris on to the road and heavy rainfall and associated flooding caused several road closures in Penrith, NSW on January 15.

According to the Australia Bureau of Meteorology (BoM), warmer temperatures are expected from January 22 onwards indicating that this may exacerbate a new risk of bushfires due to high winds. The BoM warned that strong winds are expected at the East Gippsland region following thunderstorms on the previous day. The situation on the island remains fluid; earlier this month, people in East Gippsland were evacuated as bushfires destroyed whole towns.

Recommendations

To address a future where devastating seasonal bushfires may be a new normal, those with supply chain operations in Australia should consider adopting the following risk-mitigating steps:

  • Create visibility through mapping of vulnerable suppliers and transportation lanes: The ability to maintain visibility of suppliers who may be in areas vulnerable to bushfire-related disruptions allows supply chain managers to quickly assess potential ripple effects within the manufacturing network, cascade communication upon learning of a potentially disruptive event, and trigger business continuity plans for affected sites in a timely manner. Of additional importance is the consideration of transportation lanes and assessing secondary production impact, through mapping vulnerable highways and railways. Organizations are advised to identify priority shipments early on as fire activities disrupt over land transport; low visibility caused by ashes may cause flight cancellations/ delays at airports and berthing delays at ports. By identifying alternative routes ahead of time, delays to critical shipments can be avoided. 
  • Ensure that suppliers in Australia are not single-sourced: Where possible, sourcing managers should consider dual-sourcing strategies and identify alternative suppliers to minimize impact on production schedules. Having alternative suppliers in place can ensure that production schedules are not held up indefinitely due to a single event. 
  • Verify that alternative suppliers are able to deliver increased volumes: Understanding the capabilities and capacities of alternative suppliers, and ensuring the required contractual agreements are in place, are critical in ensuring agility when disruptions occur. Established communication channels in working with alternative suppliers can also help speed up processes during a disruption. 
  • Monitor weather forecasts, be mindful of seasonal conditions, and plan capacity ahead: Given the residual impact of catastrophic events like bushfires, customers are encouraged to follow wind, dryness, and cyclone patterns in Oceania, plan production schedules and cargo shipping ahead, and evaluate backup production and cargo capacity where possible. 
  • Set up emergency communication systems: Intermittent power outages have occurred in severely affected areas as a result of the bushfires; thus, businesses connecting to phone and internet services that are critical to production and for continue trading, supplying goods, and services should have back-up communication channels in place to communicate with employees and suppliers to avoid disruptions. 

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