Source: Golden Ten Data
At least American businesses and consumers may once again face one of the major lessons of the COVID-19 pandemic.
On Tuesday (March 26), a bridge in the seaport city of Baltimore in Maryland, USA, was hit by a container freighter and collapsed on the pier. The accident caused the closure of the port of Baltimore and a major highway, which will disrupt traffic in the mid-Atlantic region for weeks or months and accelerate the movement of goods to the west coast of the United States, as importers and exporters will try to avoid possible bottlenecks in trade routes from Boston to Miami.
Shipping giant Maersk confirmed in a statement on the same day that the “Dali” container ship that collided with a bridge in Baltimore was leased by Maersk and was carrying Maersk's customer's cargo.
Baltimore is one of the busiest ports on the east coast of the United States. Lars Jensen (Lars Jensen), CEO of shipping consulting agency Vespucci Maritime, said, “About 21,000 standard containers (TEU) of goods must now be transferred through other ports in the region every week. Furthermore, this means that goods that have already entered the Baltimore terminal will have to wait an unknown period of time until the sea channel is reopened, or be re-intercepted and transferred to another port.”
Ryan Petersen (Ryan Petersen), founder and CEO of the San Francisco-based digital freight platform Flexport Inc., said, “The company has begun to shift freight volume from the east coast to the west coast. The closure of the Baltimore port means that all other ports on the East Coast are receiving this wave of cargo, which will cause congestion and delays.”
Peterson said this also means that businesses and consumers may once again face a major lesson the COVID-19 pandemic once brought to the supply chain: a sudden 10% or 20% increase in freight volume through a port “is enough to cause large backlogs, congestion, ships waiting at sea, and all kinds of delays, which are likely to increase.”
Local, state, and federal officials who are concentrating on rescue efforts are reluctant to speculate on how long America's busiest auto port may be closed, but logistics experts and economists have begun to assess the impact of the accident. The emerging consensus is that for some time this will be a logistics bottleneck, but it is a local issue and should not destabilize the US economy because companies are able to adapt.
European car manufacturers, including BMW AG (BMW AG), Volkswagen AG (Volkswagen AG), and Mercedes-Benz Group AG (Mercedes-Benz Group AG), have facilities to handle automobile transportation inside and outside the port. Ford Motor Co. (Ford Motor Co.) and General Motors Co. (General Motors Co.) said they are already trying to find alternative routes.
Ford's Chief Financial Officer John Lawler (John Lawler) said, “It's a big port and there's a lot of traffic, so it's going to have an impact. We'll look into workarounds. We will have to move some of our goods to other ports on the east coast or elsewhere in the country.”
According to Dean Croke (Dean Croke), chief industry analyst at DAT Freight & Analytics, Baltimore is one of the major portals for US agricultural equipment and construction machinery (such as combines, tractors, hay balers, excavators, and backhoes). He said March is the peak period for agricultural equipment imports in Baltimore because everyone has to prepare for the planting season in the Midwest. Additionally, it is an important port for construction materials such as timber and gypsum.
Supply chain risk assessment company Everstream Analytics said the port is also an important hub for goods such as steel, aluminum and sugar, and about 30 to 40 container ships dock here every week. According to Xcoal Energy & Resources LLC, transportation of up to 2.5 million tons of coal could be blocked.
A “black swan”? A terrorist attack?
“Can we rule out the idea that this accident (the collapse of the Baltimore Bridge) was a terrorist attack... We must not do that,” Michael Flynn (Michael Flynn), a former national security adviser and retired lieutenant general during President Trump, said in an online interview.
Flynn said that the impact of the container ship on the Baltimore Bridge was a “black swan” incident. However, the US White House and federal government agencies quickly declared that this was not a terrorist attack.
“The authorities have seriously downplayed the risk of wrongdoing here,” Bloomberg's Josh Wingrove said.
Preliminary views from logistics experts
Mirko Woitzik, Everstream's director of intelligence solutions, said: “This will disrupt ships' schedules, strain labor and processing capacity at other ports such as Philadelphia and Norfolk (Norfolk), and overflow congestion and delays could continue for months.”
“This will result in an average 10% increase in throughput at the Port of New York-New Jersey and the Port of Virginia in Norfolk,” said Lars Jensen, founder of Vespucci Maritime. This will also “introduce some bottlenecks and cost increases, but this should be largely manageable.”
Mike DeAngelis of supply chain visualization platform FourKites Inc. said that ports as far as Savannah (Savannah), Georgia and Charleston (Charleston), South Carolina, may also absorb spillover effects. “This will inevitably have an impact on the flow of goods and infrastructure on the east coast of the United States.”
Emily Stausbøll, an analyst at the Oslo-based shipping analysis company Xeneta, said in a statement: “Shipping services from the Far East to the east coast of the United States have been affected by the Panama Canal drought and the recent Red Sea conflict.” These factors have led to a 150% increase in shipping costs, she said, and now “this latest incident will heighten these concerns.”
Economists' initial opinion: the impact of the disaster will be limited
Gregory Daco, chief economist at EY (EY), said: “I expect the macroeconomic impact to be limited, but it is worth watching closely.”
Stephen Stanley, chief economist at Santander Bank of America Capital Markets LLC, said, “Until the bridge is rebuilt, the more lasting economic impact will be a disruption in traffic around the Baltimore area.”
Mark Zandi, chief economist at Moody's Analytics, said: “While the broader economic impact will be limited, this is just another reminder that the country's infrastructure and supply chain are weak.”
The Oxford Institute of Economics said that with the temporary closure of Interstate 695, traffic on Interstate 95 or Interstate 895 will increase in the foreseeable future.
As to how long the effects will last, Flexport's Peterson said the time required for full recovery “could be a few months.” The company had two containers on board the ship that hit the bridge, and hundreds more were on board the ship en route to Baltimore. “But sometimes these people work miracles,” he added.
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