Bridge disaster leads to new supply chain woes
The collapse of Baltimore’s Francis Scott Key Bridge, which severed ocean links to the city’s port, adds a fresh headache to global supply chains already struggling with the effects of war, climate change and higher interest rates.
Tuesday’s mishap means a significant disruption for US east coast shipping, with trade in vehicles, coal and machinery likely to be the hardest hit, according to government officials and industry executives.
It comes as global shippers are grappling with a historic drought that has left the Panama Canal without enough water for routine operations, as well as two wars in Europe and the Middle East that have turned routine commercial voyages into daring adventures.
Two years of rising interest rates also have increased the cost of higher inventories, which help manufacturers and retailers guard against unexpected snafus.
“This comes at a particularly difficult time,” said Bindiya Vakil, chief executive of Resilinc, a supply chain management company. “With interest rates high, companies are looking to keep products moving.”
The container ship that struck the bridge remains snarled in the span’s twisted wreckage, blocking the sole channel that connects the Port of Baltimore to the Atlantic Ocean.
On the docks, trucks continued to move cargo. But vessel traffic to and from the port was suspended “until further notice”, according to the Maryland Port Authority website.
“Nothing’s going to get out of the port, and nothing is going to get in for the foreseeable future unless they clear away that rubbish,” said Carl Bentzel, a commissioner with the Federal Maritime Commission.
“It will take substantial effort to clear that facility. I think it will be a long-term project deserving of federal support like a hurricane or major natural disaster.”
Normal port operations were unlikely to resume any time soon, he said.
That’s bad news for automakers such as Mazda, Mercedes-Benz, and Subaru, which are major users of the facility. Baltimore also is the US’s leading “roll-on, roll-off” port, handling more self-propelled cargo such as heavy construction equipment than any other. Goods that were already on the docks could still be moved by trucks, according to Ken Adamo, chief of analytics at DAT Solutions. But e-commerce warehouses in eastern Pennsylvania also were likely to feel the effects of the port’s shutdown.
Supply chain executives and the ocean carriers will determine the best response to the disruption, depending upon where their cargo is going.
“They’re scrambling right now,” Adamo said.
Brian Bourke, global chief commercial officer for SEKO Logistics in Chicago, said the bridge collapse also would complicate the shipment of hazardous materials through the US northeast and mid-Atlantic region.
Within a 50km radius, there were roughly 3200 factories, warehouses and distribution centres that potentially used the port, Vakil said.
The port’s closure could disrupt shipments of 7000 parts or components and 3300 finished products, according to Resilinc’s database.
Larger retailers such as Amazon or WalMart would be able to navigate the disruption more easily than smaller companies that lacked alternative logistics arrangements, Vakil said. Some manufacturers could run short of parts in the coming weeks.
The expected hit to trade is likely to fall far short of the massive disruption experienced during the Covid-19 pandemic, when consumers and businesses alike struggled to obtain needed goods.
Many companies have modified their “just-in-time” manufacturing strategies by maintaining higher inventories of needed parts, allowing them to ride out temporary problems.
“We did learn the lesson from the past,” Vakil said.
As work begins to clear the blocked shipping channel, ports in New York-New Jersey, Philadelphia, Delaware and Norfolk were likely to share the load, said Joe Harris, senior director for communications with the Virginia Port Authority.
“It’s hard to say where it’s all going to go; it’s very early, but we’ll see something.”
Officials in Norfolk, Virginia, are bracing for an increase in traffic, as vessels that would have docked in Baltimore are rerouted to other ports.
Norfolk handled a significant jump in container volume during the pandemic, and had the capacity to absorb vessels that were redirected from a stricken Baltimore, Harris said. – Washington Post