There is yet another incident of a potential major industry supply chain disruption. An early morning fire on Friday ravaged six warehouses at the sugar storage facilities at the Port of Santos, Brazil, paralyzing sugar export operations for weeks to come.
A published report from Reuters and other global media outlets indicates that this fire impacted 6 warehouses operated by Copersucar, igniting 180,000 tonnes of sugar representing 10 percent of Brazil’s monthly sugar exports. Of more concern, these reports indicate that early estimates of the damage could put 10 million tonnes of export capacity offline for six months or more. Copersucar itself represents 47 sugar mills across Brazil and its trading desks are estimated to account for nearly a fifth of the world’s sugar exports.
The fire itself was reported to have started somewhere in the conveyor system that transports sugar among the warehouses and to dock facilities. Reuters cites television footage showing a three-story high mountain of sugar engulfed in flames inside a warehouse that had lost most of its siding and roof to the flames. After about three hours, firefighters managed to contain the fire, but the fire can remain smoldering for days. Four persons were reported injured by this fire.
Today’s published reports from both the Financial Times and the Wall Street Journal point out that Brazil’s sugar harvest was is at all-time high, possibly alleviating concerns of a major supply shortage. However, commodity markets reacted quickly to the news, driving the futures market up 6 percent to near one-year highs, and then settle to a 2.6 percent spike by the close of trading.
There is more concern regarding the transport facilities at the Port of Santos, which were already being logistically challenged by severe congestion. This latest incident is bound to add additional logistical challenges. In the FT published report, a commodities risk management advisor for Archer Consulting indicates a scenario of 8 month to a year before the sugar terminal returns to full capacity.
There is no doubt that logistics and procurement professionals will be scrambling over the coming days and weeks to secure alternative means to ship sugar supplies from alternative ports, which will add additional costs.
There are many food, beverage and other related industry supply chains that rely on sugar as a basic direct or indirect ingredient. Thus, the full impact of this disruption is yet to be quantified and assessed. In the meantime, impacted food-related supply chain teams including sourcing and procurement would be prudent to initiate scenario-based analysis related to either spikes in inbound cost, delays in shipments, or temporary disruption of supply.