How the Baltimore Bridge Disaster Could Impact Supply Chains, Local Economy

Andrew Moran
By Andrew Moran
March 28, 2024US News
How the Baltimore Bridge Disaster Could Impact Supply Chains, Local Economy
Workers continue to investigate and search for victims after the cargo ship Dali collided with the Francis Scott Key Bridge causing it to collapse a day earlier in Baltimore on March 27, 2024. (Scott Olson/Getty Images)

The Francis Scott Key Bridge disaster at the Port of Baltimore is expected to produce a ripple effect for both the local and national economy—from supply chain disruptions to potential inflationary pressures.

As officials and experts examine the fallout after a cargo ship struck the bridge, causing its collapse, experts are debating how a closed Baltimore port could affect trade flows.

The Baltimore port accounts for 4 percent of East Coast trade and has transformed into a central trade hub that ranks ninth among U.S. harbors. According to the Bureau of Transportation Statistics (BTS), the port currently ranks 17th in total tonnage and 10th in dry bulk tonnage.

To understand how vital it has become for trade on the Eastern Seaboard, the port handled a record 52.3 million tons of foreign cargo worth nearly $81 billion. Additionally, it sees vast imports and exports of cars and light trucks, farming machinery, and commodities like liquefied natural gas (LNG) and coal.

As much as $200 million in value of goods pass through the port each day.

With authorities still clearing the debris, it is unclear as to when the channel will reopen or how long it will take to rebuild the bridge.

“No matter how quickly the channel can be reopened, we know it can’t happen overnight,” Transportation Secretary Pete Buttigieg told reporters from the White House on March 27. “So, we’re going to have to manage the impact in the meantime.”

John Kartsonas, a former Citi shipping analyst and managing partner at Breakwave Advisors, does not believe the Port of Baltimore will return online this year, creating upheaval in the supply chain process.

“It will take a while for the situation to resolve and to begin operating normally again. So definitely there will be delays in deliveries of goods,” he said in a note.

For now, industry observers are assessing how much the bridge disaster will weigh on supply chains, the local economy, and inflation.

Supply Chain Disruptions

The disruptions emanating from the bridge disaster will unlikely emulate the pandemic-era supply chain crisis, according to Chris Tang, a professor at the UCLA Anderson School of Management.

“I think that this one is not as severe as what we observed during COVID because it’s more localized,” Mr. Tang told The Epoch Times.

In the meantime, however, a chorus of experts warns that the latest supply chain snafu could lead to short-term headaches for businesses and consumers.

First, the event has frozen maritime traffic. Ten ships are stuck in the Port of Baltimore, and other vessels carrying cars, heavy equipment, and various consumer goods have been scrambling to find other ports to load or unload cargo.

This comes as delivery times have already increased in recent months due to the attacks on vessels in the Red Sea and bottlenecks in the Panama Canal.

According to Mike DeAngelis, the Head of Ocean at real-time supply chain visibility provider FourKites ocean solutions, container vessels have been searching for alternative ports, including Charleston, New York, Norfolk, and Savannah.

The situation could be more complicated for containers waiting to leave the Port of Baltimore.

“Any containers already waiting for export from the Port of Baltimore will need to either wait for the eventual re-opening of the waterway or be gated out of the terminals and transported to one of these alternate ports,” Mr. DeAngelis told The Epoch Times. “It is too soon to know to what degree, however, this will inevitably have an impact on the cargo flows and infrastructure.”

Patrick Penfield, a professor of supply chain practice at Syracuse University, says the automobile industry is “very dependent” on the Baltimore port.

Roughly 850,000 vehicles were shipped in and out of the port last year, and the automobile companies “will now need to reroute ships to other East Coast ports in the future, which will cause supply chain delays,” he told The Epoch Times.

Another challenge is that rerouting ships will apply pressure on the other ports, resulting in longer wait times.

The culmination of bottlenecks and delays will lead to higher shipping costs throughout the Eastern Seaboard that could translate to greater consumer prices, warns Robert Khachatryan, the CEO of Freight Right Global Logistics.

“The bridge disruption on the I-695 corridor, a vital part of Interstate 95, will snarl freight movements, causing delays into Easter weekend and driving up shipping costs. These increased costs are expected to be passed on to consumers already grappling with inflation,” he told The Epoch Times.

Mr. Tang noted that shipping rates have rocketed from what would normally be $1,500 to as much as $4,000, citing the trifecta of issues: Houthis’ attacks, the Panama Canal troubles, and now the Baltimore disaster.

When asked if the bridge disaster would lead to higher inflation, Mr. Buttigieg said it was “too soon to say.”

Local Economic Impact

Maryland Gov. Wes Moore emphasized that the situation will affect not only Maryland but the rest of the country.

But while economists and market analysts sift through the numbers to determine the catastrophe’s impact on the nation, experts purport that it is easy to determine how much the disaster will hurt the local economy.

Dozens of ocean shipping and cruise ship companies come into the port regularly; their vessels visit about 1,800 times a year. This has created enormous employment opportunities.

The state says the port supports approximately 15,000 direct jobs and roughly 139,000 indirect positions linked to the area. Additionally, it generates about $3.3 billion in total personal income.

Mr. Buttigieg projected that the shutdown would affect about $2 million in wages.

Tax revenues are also at stake for the state and local economies. The port generates close to $400 million in state and local receipts each year.

Because the timetable for rebuilding the decades-old bridge is unclear, Maryland Senate President Bill Ferguson announced on X that he would introduce emergency legislation to pay workers affected by the disaster.

“The human cost of lives lost yesterday is overwhelming and tragic. The economic and stability loss to the thousands impacted in the days ahead cannot be understated,” Mr. Ferguson posted on X, formerly Twitter.

President Joe Biden echoed these concerns, vowing to “move heaven and Earth” to assist the people employed at the port.

“We’re going to do everything we can to protect those jobs and help those workers,” President Biden stated.

According to Mr. Tang, the disaster could manufacture “a cascading effect” that will disrupt the employment situation beyond the Baltimore port. However, the disturbance to the supply chain could be mitigated by shifting workers to other ports, he noted.

From The Epoch Times

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