Home World News What is the economic impact of the Baltimore bridge collapse?

What is the economic impact of the Baltimore bridge collapse?

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What is the economic impact of the Baltimore bridge collapse?

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Wreckage lies across the deck of the Dali cargo vessel, which crashed into the Francis Scott Key Bridge causing it to collapse, in Baltimore.
| Photo Credit: Reuters

Diverted cargo and supply chain disruptions have left businesses rushing to avoid an economic hit following the collapse of a major bridge in Baltimore after it was hit by a cargo ship.

With vessel traffic at the Port of Baltimore suspended until further notice since Tuesday’s accident, experts warn of knock-on effects but say these should be manageable in the near term.

Baltimore is the biggest vehicle-handling port in the country, including cars and heavy farm equipment, Transportation Secretary Pete Buttigieg told a press briefing.

He estimates there is between $100 and $200 million in value coming through the port daily, with “about $2 million in wages that are at stake every day.”

He added in a CBS interview that ocean shippers, other ports and cargo owners are working to figure out where to divert ships headed that way.

Besides the direct hit to thousands of Baltimore port workers, Maryland Governor Wes Moore warned in a CNN interview that more than 140,000 people could be indirectly impacted by disruptions.

“The Port of Baltimore has such a significant economic impact, not just on my state,” he said. The port handled over 50 million tons of foreign cargo last year.

“This is the impact it’s going to have on our country’s economy,” he added.

Experts noted that the economic blow will also depend on the length of work stoppage.

Ted Hampton, senior credit officer at Moody’s Ratings, said replacing the collapsed bridge “will likely take months or even years.”

– Diverted cargo –

Cargo bound for Baltimore will probably be partially diverted to the Port of New York and New Jersey, analysts say.

The port “has the capacity to handle whatever will come their way,” a shipping industry source told AFP.

This is because the Port of New York and New Jersey is the second or third busiest in the country, and handles the equivalent of Baltimore’s year-long container volume in a much shorter period, the source said.

Bethann Rooney, port director at the Port Authority of New York and New Jersey, added that it is “proactively working with our industry partners to respond as needed and ensure supply chain continuity along the East Coast.”

While there will be “noticeable headaches” in the coming months, economist Ryan Sweet at Oxford Economics expects businesses will be able to adapt.

There will be supply chain disruptions, but he said: “I don’t think it’s going to have a macroeconomic effect because there are so many large ports within close proximity.”

These ports can likely handle a rise in cargo volumes, Sweet noted.

He added that there will probably not be a “broad-based supply shock” that will impact US inflation for consumer goods or GDP.

– Autos and coal –

Certain sectors will be more impacted, such as automobiles, noted logistics platform Container xChange.

According to official figures, the Baltimore port’s private and public terminals handled over 840,000 autos and light trucks in 2023, the most among US ports.

“The port is a crucial gateway for specialized cargo and bulk handling,” said Container xChange.

It warned that delays in cargo movement “could lead to inventory shortages, affecting businesses that rely on timely deliveries, like the automotive industry.”

Companies seeking alternative routes could also face greater transportation costs.

Among auto companies importing through Baltimore is carmaker Mazda, which told AFP that the Baltimore port is “a vital part of Mazda’s logistics chain in the United States.”

“Mazda is currently assessing the potential impacts of a prolonged closure of the Port of Baltimore to ensure minimal disruption to operations,” a spokesperson said.

Automaker Stellantis said it is starting talks with transportation providers for “contingency plans to ensure an uninterrupted flow of vehicles” to customers.

The port also ranked second last year in the United States for coal exports.

While it accounts for around a quarter of seaborne US coal exports, the United States only makes up about six percent of the global seaborne trade, said Alexis Ellender, a lead analyst at trade intelligence firm Kpler.

While there will be a regional hit, “on a global scale, the disruption would not be significant,” he said.

Sweet of Oxford Economics said there will unlikely be broad-based shortages in autos, with weaker demand for new vehicles and higher inventories these days.

“The issues could be more isolated to certain companies that rely on the Port of Baltimore to bring in their inventory,” he said.

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