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Baltimore Bridge Collapse Tests U.S. Supply Chains

An Asia-bound cargo ship struck Baltimore’s Francis Scott Key Bridge in March 2024.

Posted on April 22, 2024

The accident that closed the Port of Baltimore initially raised concerns that supply chains would take another hit just as global shipping adjusted to disruptions from Houthi attacks on vessels in the Red Sea. But supply chains have been resilient thus far, and U.S. efforts to fortify them are accelerating.

Have there been global economic repercussions from the collapse?

The bridge’s collapse and the port’s temporary closure have caused a logistics challenge but not a major supply-chain crisis; so far, the global economy has been relatively unaffected. The port, which was ranked three hundredth on the World Bank’s 2022 Container Port Performance Index, is not a major artery of global trade. The U.S. Army Corps of Engineers has said that the port could reopen for normal operations by the end of May.

Before that happens, freight diversion to other U.S. ports, such as the Port of New York and New Jersey and the Port of Virginia, are adding demand for services, trucks, and truck drivers to move goods around, which will likely exacerbate congestion in ports and highways on the United States’ East Coast and could raise labor costs. Meanwhile, the bridge collapse is diverting an estimated five thousand trucks per day, carrying $28 billion in goods, leading to delays and raising fuel costs for shippers and their clients.

How important is the Port of Baltimore to the U.S. and local economies?

Ranked as the fifteenth-largest container port in the United States, the Port of Baltimore is much smaller than the largest East Coast ports, including the Port of New York and New Jersey and the Port of Virginia. Still, it ranked [PDF] as the third-largest port on the East Coast and ninth-largest U.S. port in terms of international cargo tonnage in 2023.

Last year, the Port of Baltimore’s top export commodities included automobiles and light trucks, coal, and liquified natural gas (LNG). It has handled the most automobiles and light trucks of any U.S. port for thirteen years straight, including 847,158 vehicles in 2023 alone. It is also the second-largest port for U.S. coal exports, especially steam coal (mostly used for electric-power generation and industrial heating) and metallurgical coal (used as a raw material in steel production). According to the Energy Information Agency (EIA), the port handled twenty-eight million tons of coal exports in 2023—second only to the Port of Virginia—making up 28 percent of U.S. total annual coal exports. Over the past five years, India has been the top recipient of U.S. steam coal shipped from the Port of Baltimore, whereas China, Japan, and South Korea have been the top customers for its metallurgical coal. In 2023, the port exported over 5.4 million tons of LNG, or about 6 percent of U.S. total LNG exports. It also ranked first in the United States in the import and export of farm and construction machinery and the import of sugar.

The port’s temporary closure is unlikely to trigger an immediate hike in car prices. However, it is likely to reduce U.S. coal exports, but only in the short term. In February, the U.S. auto industry’s inventory-to-sales ratio and new-vehicle inventory hit eighty days of supply. By the start of March, many brands’ inventories were 52 percent higher than a year ago. The increase gives car dealers and manufacturers enough cushion to withstand the shock of temporary port closure. The EIA estimated that the closure would reduce U.S. coal exports by more than 30 percent in April and 20 percent in May, but the agency did not project a major impact on U.S. coal exports beyond 2024. The impact on LNG exports is likely to be minimal, as the bridge’s collapse has not impacted the operation of the nearest LNG terminal, located 79 miles (127 kilometers) upstream from the port. There is unlikely to be an immediate sugar price hike either, considering that Domino Sugar—the port’s largest bulk importer and one of the nation’s biggest sugar companies—has six to eight weeks of raw sugar supply at its Baltimore refinery.

Although the temporary closure of the port will only have an insignificant impact on prices nationwide, it has considerable local effects, such as wage losses for 15,300 jobs at the port and tax losses at the state and local levels; the accident that closed the port also caused the death of six construction workers. A one-month port closure could cost Maryland $28 million in lost tax revenue.

How important are U.S. ports to the global economy?

American ports are gateways for domestic and international trade. In 2022, U.S. ports handled 42.9 percent [PDF] of U.S. international trade, worth more than $2.28 trillion.

The smooth functioning of U.S. ports with commodity specialties, such as the ports in New Orleans for agricultural products and Houston for petrochemicals, is critical for global economic stability. Due to the damage caused by Hurricane Katrina, the shutdown or partial closure of the five main ports in the Gulf of Mexico—the Ports of New Orleans, South Louisiana, Mobile, Pascagoula, and Gulfport—directly led to U.S. export losses and the disruption of major global commodities supply chains, with the ripple effect of higher commodities prices globally.

The world has gotten used to supply-chain issues in recent years, such as pandemic-fueled shortages and a ship stuck in the Suez Canal. Does the current supply-chain model, in which massive ships traverse narrow passageways—often across geopolitical fault lines—still work?

Thanks to modern technology such as real-time ocean-traffic monitoring, logistical emergencies can often be mitigated and resolved relatively quickly, although they incur some shipping delays and added monetary costs. For example, in 2021, it took six days to refloat the colossal container vessel Ever Given when it got stuck in the Suez Canal, blocking global maritime shipping at one of the world’s busiest waterways. From a technical perspective, the fact that freight and cargo can be diverted to other ports and distributed by trains or trucks, and that disruptions can be addressed quickly, suggests that supply chains are quite resilient and disruptions can be quickly resolved to minimize costs.

However, technology cannot quickly mitigate supply-chain risks caused by geopolitical tensions or by prolonged shutdowns of major production sites due to social and environmental shocks, such as the COVID-19 pandemic. A leading feature of the existing global distribution of supply chains is geographically concentrated production, which reduces production costs and results in cheaper products. But supply-chain patterns that prioritize efficiency are exposed to greater risk of geopolitical conflict, trade restrictions, and production stoppages. Additionally, extreme weather conditions such as extended draught can reduce the handling capacity of critical sea-lane passageways, such as the Panama Canal, extending shipping time and raising logistical costs.

How can supply chains be made more resilient?

The U.S. Coast Guard and Army Corps of Engineers have long track records of restoring shipping channels to their full capacity in times of disruption. Besides that technical competency, the U.S. government can also use industrial policy to secure manufacturing supply chains. Such policies incentivize firms to manufacture goods in the United States and neighboring countries, bringing supply chains home or closer to home at the cost of inflationary subsidies. U.S. lawmakers have also passed a bipartisan infrastructure law to fund local infrastructure and transportation networks and strengthen digital connectivity. In February, the Joe Biden administration issued an executive order to fortify U.S. supply chains by improving infrastructure security and cybersecurity of U.S. ports.

There are several other ways to strengthen supply-chain resilience, such as improving supply-demand management. On the supply side, unexpected supply disruptions can be cushioned by maintaining an appropriate level of excess inventory, creating emergency stockpiles or strategic reserves, diversifying supplier sources and manufacturing facilities, and preserving spare production capacity. Additionally, exploring alternative industrial inputs and possible substitutions can improve manufacturing flexibility and reduce dependence on materials processed by one or only a few countries or suppliers.

On the demand side, improving demand monitoring and forecasting can improve corporate and market preparedness for emerging supply-chain challenges. In times of major disruptions, strengthening customer education and market messaging will be critical to reducing panic buying and alleviating the acuteness and social costs of supply chain-crises.



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