 TradeMoves is headquartered in Maryland, and the collapse of the Francis Scott Key Bridge in Baltimore in March was a stark reminder of the importance of port and transportation infrastructure not only to cross-border trade but to the local economy. This blog touches on both.
Maryland’s Port of Baltimore is a major trade hub for the United States as it is the ninth-largest port by volume and value and the third-largest on the East Coast as of 2023.[1] The port handled a record amount of cargo valued at $80 million and was the nation’s top port in the trade of automobiles, farm machinery, and sugar.[2] The port directly creates 15,000 jobs and generates $4.7 billion for Maryland.[3] The collapse of the Francis Scott Key (FSK) Bridge in the Port of Baltimore has already impacted the movement of goods domestically, as the cleanup and unloading of the Dali containership that crashed into the bridge is still in process with the soonest expected reopening date for the port being the end of May.[4] Overall, the closure of the port amplifies supply chain disruptions already caused by external factors, such as geopolitical developments and labor strife. Rerouting of Trade Collapse of the FSK bridge initially caused 10 ships to be stuck in the Port of Baltimore and forced other ships waiting outside to reroute to different East Coast ports, including Norfolk and New York/New Jersey.[5] The director of the Port Authority at the Port of New York and New Jersey indicated the port is now handling about two-thirds of Baltimore’s container business.[6] Rerouting of shipments may be longer term as the bridge cleanup and reconstruction process is expected to be lengthy. Some companies may even reroute to ports on the West Coast. As in the case of most trade disruptions, redirection of trade is expected to cause delays in delivery time and increased costs. Rerouting of goods also increased the use of other modes of transport including railways and trucking. A new CSX freight rail route is facilitating the movement of diverted containers from New Jersey/New York to Baltimore. Norfolk Southern announced a route to carry diverted freight between the Elizabeth Port in New Jersey/New York and the Seagirt Marine Terminal in Baltimore.[7] This will be a factor in the increased cost of goods as “in most cases, the companies that own the goods will be responsible for the cost of bringing them to Baltimore by truck or rail from the new destination port.”[8] Some U.S. industries have been impacted more than others, but quick action and workarounds have minimized significant trade contractions. The Port of Baltimore is the second largest U.S. export hub for coal following Hampton Roads port in Norfolk, Virginia. In early April, following the port closure, the U.S. Energy Information Administration (EIA) forecasted a 5.3% annual decline in coal exports compared to 2023, a significant setback from 1% growth anticipated earlier by EIA. In rerouting coal shipments to alternate ports, including nearby Norfolk, and progress towards resuming trade via Baltimore, the EIA adjusted its forecast to 1.1% decline.[9] While this setback hit regional coal exporters in Appalachia, the disruption to U.S. coal exports has not significantly impacted coal prices as Baltimore exports less than 2% of global seaborne coal.[10] Potential Increase in Controls and Auditing In 2023, the port imported $58.8 billion worth of goods and exported $21.9 billion.[11] Zaili Yang, a Professor of the Maritime Transport at Liverpool John Moores University, anticipates the impact on global supply chains will be minimal as one port shutdown is not as integral as closures/delays in major shipping routes like the Suez Canal or Panama Canal. Zaili Yang anticipates the bigger impact will be on implementation of preventative initiatives to reduce the risk of similar bridges collapsing through anti-collision measures by regulatory bodies, such as the International Maritime Organization, and bridge structure inspection and reinforcement by domestic transport authorities.[12] In addition, there may be further development of U.S. regulations on the mandatory use of tugboats near important infrastructure. If regulations like this do come into fruition, added costs imposed on the shipping industry and passed through to customers is anticipated.[13] Future Outlook The bridge collapse is an example of unforeseen risk that can occur at any port and highlights the importance of continuous regulatory improvements to mitigate infrastructure impediments, and government-led investment in projects which promote trade flow diversification. It is also a reminder as to why companies should continue to prepare for unexpected disruptions and build supply chain resilience through preemptive planning and strong communicative relationships with relevant parties, including customs brokers, carriers, suppliers and customers, especially in a time when trade disruptions at ports and trade routes are caused by a plethora of issues ranging from geopolitics to environmental changes. Supply chain resilience strategies include supply chain mapping, audits, diversification, scenario planning and the leveraging of technology. Return to normalized trade in the Port of Baltimore is underway through the opening of temporary alternative channels in the port and the anticipated opening of the main channel within the next few weeks.[14] In the near future, the United States could experience further trade disruptions at East Coast and Gulf Coast ports caused by labor strife could intensify and expand the impact of trade disruptions as the International Longshoremen’s Association’s six-year contract with the U.S. Maritime Alliance, which represents port terminal operators and ocean carriers on the East Coast, expires at the end of September and negotiations are starting.[15] As seen last year during the West Coast labor dispute, this may result in a period of suspended trade operations at certain ports. It is encouraged that importers and exporters continue to monitor the news for developments in trade. [1] 2023 Foreign Commerce Statistical Report Maryland Port Administration [2] Port of Baltimore Government of Maryland [3] How Baltimore’s Key Bridge collapse will affect supply chains and the economy PBS (28 March 2024) [4] Shipping giant Maersk says Baltimore port reentry decision is near as collapsed bridge cleanup progresses CNBC (7 May 2024) [5] How Baltimore’s Key Bridge collapse will affect supply chains and the economy PBS (28 March 2024) [6] Trains, Trucks and Tractors: The Race to Reroute Goods From Baltimore New York Times (17 April 2024) [7] CSX completes first diverted cargo shipments on new rail line for Port of Baltimore CNBC (4 April 2024) [8] Baltimore braces for economic hit amid fears port shuttered for months The Washington Post (31 March 2024) [9] Reuters Events: CSX fully resuming Baltimore coal exports this week, CEO says Reuters (22 May 2024) [10] Baltimore bridge collapse: Coal exports likely to be blocked for weeks Business Standard (27 May 2024) [11] 2023 Foreign Commerce Statistical Report Maryland Port Administration [12] Baltimore bridge collapse sparks trade disruption with unusable port – what economic impact will it have? The Independent (2 April 2024) [13] Baltimore bridge collapse reveals a critical gap in federal government’s port protection powers CNBC (2 April 2024) [14]Deepest open channel yet gives larger commercial vessels access to Port of Baltimore CBS (21 May 2024) [15] Strikes at East Coast, Gulf ports are a big labor risk this year, and trade diversions have already started CNBC (7 March 2024) Comments are closed.
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