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This column is based on data from Global Trade
Atlas.
After the deluge, the rebuild.
As Hurricane Florence marched up the US East Coast this weekend,
killing at least 16 people and wreaking havoc with unrelenting rain
and flooding, residents, politicians and planners are trying to
figure out the cost of the damage.
Total insurance claims are expected to be around $20 billion,
and the overall economic impact on the US could be as high as $180
billion, making it one of the costliest storms on record. The most
expensive hurricane, Katrina in 2005, cost the US $150 billion.
This is the Age of the Hurricane: Three of the costliest in US
history - Harvey, Irma and Maria - hit last year.
Once again, the effects on the most impacted states - this time
Virginia, Georgia, and North and South Carolina -- are sure to be
wide-ranging, ruining homes, farms, stores and infrastructure.
One thing is certain. To have enough material and keep costs
down by offering less expensive alternatives, the US will need
imports, now more expensive because of higher tariffs. Although the
country produces plentiful quantities of materials like wood, steel
and glass, it's also one of the biggest import markets for those
key construction materials.
Top US sources of wood, first 7 months,
2018
Canada $5.6 billion (+8.4%)
China $2 billion (-1.5%)
Brazil $625.2 million (+18.5%)
Chile $426.5 million (+5%)
Indonesia $296. 5 million (+62.6%)
Germany $287.1 million (+78%)
Mexico $187.6 million (+12%)
Vietnam $112.8 million (+74%)
Russia $106 million (+12%)
Malaysia $103 million (+30%)
Although it's relatively easy to ship wood within the US, there
are also more localized markets. For example, on the East coast,
where the hurricane hit, Sweden, not a big exporter to the US, is
among the top sellers of construction wood to US buyers, in large
part via furniture chain IKEA, sure to increase sales as homeowners
restock.
North Carolina's top sources of construction wood, first
7 months, 2018
Canada $159.4 million
Sweden $38.3 million
Chile $4.9 million
Ecuador $2.8 million
Brazil $2.6 million
Finland $2.3 million
Germany $1.8 million
The biggest beneficiary of US rebuilding efforts is expected to
be Canada. Despite tariffs on timber, steel and aluminum, the
country is still the biggest supplier of building materials into
the US.
For example, the country is the number one seller of copper wire
to the US, thanks to companies like Deca Cables and Domtech.
Top sources of copper wire, first 7 months,
2018
Canada $687.6 million (+55%)
Mexico $73.7 million (+61%)
Peru $26.2 million (+49%)
Germany $23.1 million (+39%)
Japan $19.6 million (+13%)
China $16.6 million (+19%)
South Korea $7.8 million (+3.5%)
France $7.6 million (+14%)
Turkey $7.3 million (+39%)
Finland $7.3 million (-21%)
The main impact will be on homes. According to an analysis by
real estate analytics firm CoreLogic, the total rebuilding cost of
around 750,000 homes that could be hit by Florence could be over
$150 billion.
One factor inflating the tab: tariffs. The US has imposed new
duties on over a hundred billion dollars of imports this year. Open
markets keep domestic producers more efficient by forcing them to
offer prices that are competitive with those of foreign
competitors. Duties mean they don't have to.
For example, the US has a multi-billion glass industry, which
the Trump administration protected this year with tariffs on
imports from China, the industry's top competitor. The tariffs mean
US shops can charge more, and that's likely to force up prices as
the US Southeast rebuilds after Florence.
Top US sources of glass, first 7 months,
2018
China $1.8 billion (+11%)
Mexico $761.2 million (+8%)
Germany $348.2 million (+1%)
Canada $246.9 million (flat)
France $169.2 million (+14%)
Japan $164.8 million (+3%)
Taiwan $164.5 million (+17%)
Italy $120 million (+21%)
India $67.9 million (+2%)
South Korea $57.4 million (+8%)
Construction material and equipment sellers like Home Depot and
Lowe's will improve their bottom lines as contractors buy materials
to fix and rebuild homes.
Another sector that will benefit from the reconstruction: scrap
merchants.
The damage from the hurricane is expected to increase supply of
used materials. Metal from the hurricane is likely to boost US
scrap exports, which have recovered in the last few years after
dropping steeply earlier this decade.
US scrap iron and steel exports, first 7
months
2009: 13 million tons
2010: 11.3 million tons
2011: 14.2 million tons
2012: 13.2 million tons
2013: 11.1 million tons
2014: 8.9 million tons
2015: 7.6 million tons
2016: 6.7 million tons
2017: 8 million tons
2018: 10 million tons
As they pick up debris and fix their homes, people hit by
Florence will have to recover in other ways. Water supplies could
be tainted. Stores and shopping malls are expecting hundreds of
millions of dollars in lost sales. An analysis by an automotive
consultancy expects that tens of thousands of automobiles will need
to be replaced. The hurricane will also hurt important parts of the
economy like shipping and North Carolina's hog industry.
US secretary of commerce Wilbur Ross last week estimated the
storm could cost the US one percent of its gross domestic product.
"We have an $18 trillion economy, so one percent of $18 trillion
would be $180 billion. That's a pretty big number," he said.
Posted 17 September 2018 by John Miller, Guest Blogger
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
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