Supply chain risk isn’t about a single disruption—it’s about how a single disruption can impact an entire supply network. Read on to see how a fire at a plant in Texas resulted in the closure of a port, multiple declarations of force majeure, issuing of lawsuits and an increase in gas prices.
On March 17, 2019, riskmethods Risk Intelligence alerted on a fire at an International Terminals Company (ITC) plant in Texas. The smoke could be seen from every part of Houston, and resulted in the city of Deer Park being issued a shelter-in-place warning. The fire burned for days as it spread across tanks that could hold up to 80,000 barrels of fuel, and then reignited again on March 23.
As a consequence of the fire, a container wall at ITC was breached, allowing fuel, water and fire suppressant foam to spill into a waterway that connects Houston to the Gulf of Mexico. The result? Seven miles of the Houston ship channel was closed while over a thousand local, state and federal workers removed 16,000 barrels of a fuel-and-water mix. Even when reopened, only one ship per hour could move through the spill area, and travel was limited to daylight hours and vessels of a specific size.
Any companies shipping in or out of the port were affected, but major Texas refineries had to take immediate action: Royal Dutch Shell Plc and LyondellBasell Industries both cut production because of the port closure. This had a quick effect on gasoline prices, which climbed by 2.75 cents per gallon over the weekend. And the struggles of LyondellBasell continued when they had to declare force majeure on one of their products, and then completely shut down one of the plants located near the fire.
But that wasn’t all. Next, Total Petrochemicals and Refining USA had to declare force majeure (inability to fulfill contracts due to unavoidable circumstances) on a specific type of product coming out of one of their plants located adjacent to the fire. And then the lawsuits started coming in. Both the county and the state of Texas issued a lawsuit against ITC in an attempt to recoup the costs that were spent to clean up after the fire, spelling potential trouble for the future of the company.
The effects of the ITC fire were widespread, and had an impact on much more than just ITC. Even now, the consequences aren't over, and the results of the lawsuit could have even more ripple effects. But don't worry: riskmethods Risk Intelligence will keep watching.
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