Typhoon Krathon Aftermath: From Port Operators to Manufacturers Everyone Faces the Brunt

4th October 2024: Taiwan has been severely impacted by the recent Typhoon Krathon, which made landfall near the key port city of Kaohsiung, bringing strong winds, torrential rain, and widespread disruption to the country’s economy. The slow-moving typhoon, equivalent to a Category 4 hurricane, caused extensive damage, closed ports, halted manufacturing activities, and forced thousands to evacuate from vulnerable areas. As a result, Taiwan’s trade flow and critical industries are facing significant short-term setbacks, with potential long-term repercussions.

Impact on Trade Flow and Port Closures

Krathon’s landfall led to the temporary shutdown of major ports across Taiwan, including Kaohsiung and Mailiao, disrupting both domestic and international trade. The ports play a critical role in Taiwan's export-oriented economy, handling a substantial volume of the country’s container shipments, including key exports like electronics, machinery, and petrochemicals.

The closure of Kaohsiung Port, Taiwan’s largest container port, is a major blow to the nation’s logistics and trade activities. This port handles a significant portion of Taiwan’s chemical exports, electronics shipments, and raw material imports. The temporary halt could lead to a backlog of shipments, congestion, and a ripple effect on global supply chains, potentially causing delays for international buyers.

Implications for the Petrochemical Sector

The petrochemical sector in Taiwan had to bear the brunt of the impact. Multiple manufacturing facilities situated across the affected area had to put on hold as a precautionary measure.

According to ChemAnalyst database following are the list of companies whose operations were affected by Typhoon Krathon across the Kaohsiung and Mailiao area.

•             Grand Pacific Petrochemical Corporation

•             Taita Chemical Company, Limited

•             Nan Ya Plastics Corporation

•             Dairen Chemical Corporation

•             Polyplastics Taiwan Co., Ltd.

•             Formosa Corp

•             Chang Chun Petrochemical Co., Ltd.

•             Taiwan Prosperity Chemical Corp (TPCC)

•             China Petrochemical & Chemical Industry Development Co.,Ltd

•             TSRC Corporation

However, the impact of the typhoon was short term, and operators have started bringing back their facilities to normal operations. Any prolonged disruption in refinery operations could have a cascading effect on the availability of petroleum products in Taiwan and across the region, potentially leading to a short-term spike in fuel prices. With Taiwan being a major supplier of refined petroleum and petrochemical products, such disruptions could impact supply chains in Southeast Asia and beyond.

Manufacturing and Economic Implications

The manufacturing sector in Taiwan, a global hub for semiconductor production, also faced disruptions. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, implemented its typhoon emergency protocols across its facilities, including fabs and construction sites. While the company does not foresee a major impact on operations, any prolonged disruption could hinder the production of semiconductors, a critical component for the global electronics industry.

The typhoon’s impact extends to other major industries, including petrochemicals, automotive, and electronics. Delays in shipping raw materials to factories could affect production schedules, especially for sectors heavily reliant on just-in-time inventory management. The temporary suspension of Taiwan’s $2.5 trillion stock market further signals the seriousness of the economic disruption caused by the storm. The Taiwan Stock Exchange, which houses TSMC and other major industrial players, shut down trading operations for a day due to the adverse weather, reflecting the market’s sensitivity to such extreme weather events.

Economic Impact

The immediate short-term effects are already being felt, with thousands of households experiencing power outages and significant rainfall leading to flooding in low-lying areas. The transportation network, including flights, train services, and road transport, has been severely disrupted, affecting not just cargo but also the mobility of the workforce. Almost 40,000 troops were on standby to assist with rescue efforts, highlighting the scale of the impact.

Agricultural Sector and Food Security Concerns

The agricultural sector has also been severely affected. Heavy rainfall and strong winds have damaged crops, and landslides in mountainous regions have cut off access to rural areas. This could lead to a temporary shortage of agricultural products, impacting food security in the region. The government has already evacuated thousands from areas prone to mudslides, but the full extent of the damage to farmlands is yet to be assessed.

Looking Ahead: Recovery and Resilience

As Taiwan begins its recovery process, the focus will shift to assessing the extent of damage and restoring normalcy to trade and manufacturing operations. The government and private sector will need to work closely to clear backlogs at ports, restore power and transportation networks, and support affected industries.

In conclusion, Typhoon Krathon has disrupted Taiwan’s trade and industrial activities, causing significant short-term losses and posing long-term challenges. The ability to quickly restore operations and prevent future disruptions will be crucial for Taiwan to maintain its position as a key player in global supply chains.