How the Baltimore bridge collapse may hurt the US and even India

Spanning two kilometres and featuring four lanes of traffic, the Francis Scott Key Bridge, which collapsed in less than a minute after being struck by a cargo ship in the early hours of Tuesday, was a vital artery in Baltimore’s industrial heartland.

All the ships in Baltimore’s port are now trapped. The vessels will have to wait for the bridge to be cleared, which is expected to take a long time. A number of vessels were also waiting to enter the port. With vessel traffic at the Port of Baltimore suspended until further notice following Tuesday’s accident, experts warn of knock-on effects but say these should be manageable in the near term.

Maryland governor Wes Moore warned, “This is the impact it’s going to have on our country’s economy.”

“We’re talking about, you know, cars, heavy trucks, agricultural equipment,” Moore said, adding that the port handled over 50 million tonnes of foreign cargo last year and will have a significant impact not only in Baltimore but throughout the United States.

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But which sector will be most affected? Will it have an impact in India?

Threat to coal markets; over 140,000 people to be affected

According to data from the Maryland Port Administration, Baltimore is the ninth busiest port in the United States and the busiest for car shipments, handling at least 750,000 vehicles in 2023.

It is also an essential route for the transportation of automobiles, construction equipment, and coal, which handled 52.3 million tonnes of foreign cargo worth nearly $81 billion (Rs 6.67 lakh crore) in 2023.  According to Moody’s Analytics, the incident will have a significant impact on auto markets, particularly Asia-Pacific’s largest car exporters, China and Japan, which rely heavily on Baltimore for imports.

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Furthermore, the coal market is expected to be significantly impacted, as more than a quarter of US seaborne coal exports pass through the Port of Baltimore, according to the report, as reported by the Economic Times.

“The coal market is also affected, with over a quarter of US seaborne coal exports, which make up about 1.5 per cent of the global coal trade, facing potential disruptions. This could influence global coal trade dynamics, reminiscent of past shifts in supplier relationships due to geopolitical actions,” Moody’s Analytics report read.

Despite the immediate challenges posed by the bridge collapse, global supply chain resilience may mitigate the long-term impact on coal and vehicle prices, the report added.

Aside from the impact on thousands of Baltimore port workers, Maryland governor Wes Moore warned in a CNN interview that disruptions could indirectly affect over 140,000 people.

Supply chain disruption in auto industry

Certain sectors will be more impacted than others, 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 specialised cargo and bulk handling, serving as a key link in many supply chains,” 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 higher transportation costs.

Among key auto companies importing through Baltimore are 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.

“At this time, no alternative plans have been finalised,” Mazda added.

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

But Sweet of Oxford Economics there will unlikely be broad-based shortages in the autos sector, with weaker demand for new vehicles and companies having 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.

Diverted Cargo

Diverted cargo and supply chain disruptions — businesses are rushing to avoid an economic hit following the collapse of a major bridge in Baltimore as a cargo ship slammed into it this week.

Analysts say cargo bound for Baltimore will likely be partially diverted to the Port of New York and New Jersey.

While this involves rerouting, 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 next several 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.

Impact on India

For India, the most pressing issue is coal exports.

In 2023, Baltimore was the second busiest US port for coal exports, with India the single largest importer. According to Ernie Thrasher, CEO of coal trading firm Xcoal Energy & Resources, the majority of Baltimore coal is exported to India for use in electricity generation, reports The Guardian.  Some of the coal will be rerouted, but complicated logistics will limit the amount that other ports can take in.

“Baltimore is a major port for the export of coal, and it’s not like you can move the coal to another facility because you need specialised facilities for that … and those that do exist are largely at capacity. Shutting down the port of Baltimore is going to have a major impact on the transportation of energy out of the United States,” Salvatore Mercogliano, an associate professor of history at Campbell University and host of the What Is Going on With Shipping? YouTube channel, told The Guardian.

With inputs from AFP