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Supply Chain Disruption Alert- Unprecedented European and U.S. Storms and Flooding

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Many of our readers may already be aware, or becoming acutely aware that these past two weeks have brought unprecedented storms and flooding both in the United States and Central Europe.  In the U.S. a rather severe series of incredible and record-breaking tornadoes and rains have impacted both the Oklahoma and Central Plains regions of the U.S.  The cumulative effect of heavy rains are beginning to impact various states along the Mississippi and Ohio River regions.

This week, flooding continues to impact major rivers in Central Europe including Austria, Germany and the Czech Republic. Areas of Hungary and Slovakia are now bracing for additional flooding.  Thousands have been evacuated from homes and factories as a result of the flooding. The flooding in northern Germany is described as the worst flooding to hit parts of that region in more than 50 years.  The city of Dresden braced for up to 9 meters of flooding and The Financial Times reports that 4000 people have been evacuated in Bitterfield, in Saxony-Anhalt, which is a hub for chemical industry production. There have already been shipping disruptions related to the Danube, Elbe and Rhine rivers, important waterways for commerce.

The combination of these unusual severe weather events involving both continents is bound to lead to some interim supply chain disruptions, especially those related to small and medium sized specialty manufacturers and services providers. Surface transportation will most likely be impacted as well.  Some parts of Germany provide highly specialized products for industry supply chains, while the Mississippi River region in a major waterway for agricultural and commodity related shipping.

As was the case in past natural disasters of this kind, firms and services providers will recover, but the long-term effects will depend on the amount of disaster and insurance coverage. In 2011, severe spring storms in the central U.S. amounted to $14 billion in damage. According to a report published in the Wall Street Journal, European economists are comparing the current devastation in central Europe to the floods that occurred in 2002 that caused nearly € 15 billion in damage.  Damage from both continents could exceed the losses incurred in the 2011 Thailand floods.

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