As Hurricane Isabel headed toward the East Coast of the United States, homeowners, businesses and Wall Street all braced for impact.
COASTAL RESIDENTS in the storm’s projected path had already begun scrambling for supplies over the weekend, stocking up on batteries, bottled water and duct tape to reinforce windows. Many businesses — from fishermen to restaurant owners — were expecting to lose money as the storm blows through. But if you had plywood or batteries for sale, business was good.
As of Tuesday, the storm was forecast to make landfall Thursday along North Carolina’s coastline. But the storm was expected to be felt all the way from South Carolina to Connecticut.
Fisherman in Stonington, Conn., home to the state’s only fishing fleet, were preparing to hole up in the harbor and wait out the storm. If the storm damages the waterfront infrastructure, industry leaders said, fishermen could be on shore up to a week.
“Oh God, it’s a lot of money,” said Arthur Medeiros, president of the Southern New England Fishermen’s and Lobstermen’s Association.
Fearing widespread damage, a number of insurers have begun restricting new sales or policy changes, such as altering deductibles, as the Category 2 storm nears the eastern seaboard.
Allstate Corp. is restricting new auto and home insurance sales in coastal zones of the Carolinas and Virginia in anticipation of Hurricane Isabel making landfall later this week. Bill Mellander, an Allstate spokesman, said Tuesday the Northbrook, Ill., insurer began restricting new sales in those areas Monday night. Allstate has also stopped new maritime sales along the East Coast from the Carolinas to New York.
Among the largest publicly-traded insurers, Allstate has the most to lose, according to analyst Chris Winans at Lehman Brothers. Winans says Allstate has a 12.3 percent share of the property casualty insurance market in the Carolinas and Virginia. He figures that a loss of $1 billion could blow away some 13 percent of the company’s profits in the latest quarter. A loss of $5 billion could wipe out 65 percent of profits, he said.
Homeowners and businesses directly in Isabel’s path began boarding up to try to minimize the damage.
At Taylor’s Do-It Center hardware store in Norfolk, Virginia, assistant manager George Wolf said Tuesday he was swamped with customers as soon as the doors opened and that large batteries and flashlights were sold out.
“You would have thought we were giving stuff away,” Wolf said. “I just sold my last 30 sheets of plywood.”
Homeowners and businesses shopping for plywood were in for another nasty surprise: Lumber prices have soared to near record levels. The price of half-inch plywood has nearly doubled from a year ago to $510 per thousand square feet, according to Crow Publications, a trade publication that tracks the lumber industry.
“There probably is going to be sticker shock for a few people,” said Ron Jarvis, vice president for lumber for Atlanta-based Home Depot.
The plywood price surge comes on continued strong demand from homebuilders and a supply squeeze caused by this year’s unusually wet weather, which has made it harder to harvest logs. Some stores and lumber yards have had a hard time keeping plywood stocked.
“Everybody is begging ” for plywood, Ed McDermid, president of Frontier Lumber in Buffalo, N.Y., told The Buffalo News earlier this month. “You basically have to have a friend to get it.”
Lumber prices continue to soar in the futures markets Monday as investors expected Isabel to further stoke demand. Stocks of retailers like Home Depot and Lowe’s were higher as investors looked for businesses that might gain from increased sales of emergency supplies of everything from flashlights to electric generators.
Other businesses in coastal tourist destinations were also expected to suffer. In Ocean City, Md., visitors to the upcoming weekend annual Sunfest already were packing up and heading back out of the resort town, said Mayor Jim Mathias. City leaders estimated there were about 150,000 residents and visitors in town Monday, but that number was dwindling, he said.
Restaurant owners were hunkering down, too, scaling back on food purchases ahead of what could be a slow weekend. Harvey Balidemaj, of Norwich, Conn., who runs the restaurant Americus along the town’s waterfront, said workers spent Monday bracing the many windows overlooking the water. He said he was reducing his inventory, anticipating fewer customers and a possible power outage.
“Freezers, they hold for four to six hours without power,” he said. “The refrigerator, everything will be garbage.”
Energy prices, which are also sensitive to storm disruptions, were mixed. Crude oil prices closed near four-month lows on Friday as the Isabel’s forecast path promised to keep the storm away from the sprawling oil production facilities in the Gulf of Mexico next week.
But retail prices of gasoline and heating oil could soar if the storm cuts production at east coast refineries.
As of Tuesday, managers at Colonial Pipeline, a key products line running from the US Gulf Coast to New York Harbor, had not decided whether to suspend service because of the storm, a company spokesman told Platts Commodity News. Parts of the line have been shut down in the past during strong storms to protect against flood damage to underground pipes. Pump stations and control centers are also vulnerable to power failures and storm damage. The pipeline delivers about 95 million gallons a day of gasoline, diesel, heating oil, and jet fuel through its 5,500-mile system from Texas to New York Harbor.
Regardless of where the storm hits, airlines will likely experience major storm-related disruptions. Officials at Dover Air Force Base in Delaware met Monday to decide whether to move the base’s fleet of giant C-5 cargo aircraft to bases out of the storm’s path.
“Because of the size of the planes, it’s got to be bases with very large air fields,” said a base spokeswoman, Lt. Olivia Nelson.
Cruise shops were diverting their itineraries to avoid the storm. Honeymooners expecting to visit the pink-sand beaches of Bermuda found themselves docked at ports as far north as Portland, Me. Caribbean-bound ships were also re-routed to coastal ports in Florida and central America.
As of Tuesday, Isabel had lost some of her punch. The storm, originally a category 5, the worst classification used by weather forecasters, had weakened to a category 2, but still packed winds in excess of 100 miles per hour. Though it too soon to estimate how much damage might be caused, investors were already speculating on the impact of the storm on the property casualty insurance industry.
Only two named hurricanes have caused more than $5 billion in property damages, according to the Insurance Information Institute. In 1992, Hurricane Andrew, the last Category 5 storm to make landfall in the U.S., cut a $19-billion path of destruction through Florida, Louisiana and Mississippi, making it the worst named hurricane on record. In 1989, Hurricane Hugo caused more than $6 billion of damages when it hit the U.S. Virgin Islands and Puerto Rico before slamming into four states on the eastern seaboard.
But a fierce storm that hit New England in 1938, before the current naming system was in place, also caused widespread destruction. If that storm were to hit today, total economic losses could be as much as $75 billion, according to Karen Clark, president of the risk assessment firm AIR Worldwide.
“The significant thing about the 1938 storm was that it hit at high tide, and there was a tremendous amount of storm surge damage which we didn’t get with Andrew,” she said.
The Associated Press and Reuters contributed to this report.