U.S. businesses, consumers will feel effects of Baltimore port closure

The collapse of the Francis Scott Key Bridge and the closure of the Port of Baltimore could have far-reaching implications for the ports of Los Angeles and Long Beach and for companies and consumers, experts say.

The bridge collapsed Tuesday about 1:30 a.m. when the Dali, a 985-footlong cargo ship, crashed into a support pillar shortly after losing power. The collision sent a majority of the bridge into the Patapsco River, claiming the lives of at least two construction workers. Four others are missing and presumed dead.

In the short term, the closure of the Baltimore port will increase costs for businesses and consumers on the East Coast, said Lisa Anderson, founder of LMA Consulting Group, which specializes in supply chains and manufacturing. That’s because container ships that were on their way to Baltimore will be diverted to ports in New Jersey, Pennsylvania and Virginia.

The closure will also affect warehouses and other logistics services, where officials will have to decide whether to switch to other facilities while the bridge is being repaired in Baltimore, Anderson said.

Trucks that were destined to carry cargo over the Key bridge will either have to go around the city of Baltimore or pass through tunnels, which have restrictions on height, width and hazardous materials.

In the long term, ports in Los Angeles and Long Beach could see more activity, especially with drought conditions reducing the capacity of the Panama Canal, Anderson said. Additionally, the shipping route from northeast Asia through the Suez Canal and to the East Coast of the U.S. has become perilous because of the war in Gaza. The Iran-backed Houthis in Yemen have been attacking commercial ships in the Suez Canal, resulting in shipping lines having to divert vessels around the southern tip of Africa.

Increased volume at the ports of Los Angeles and Long Beach will translate to more activity for local trucking companies, warehouses and rail systems, Anderson said.

“That’s a positive, but we also need to make sure it’s not going to become a new bottleneck,” she said. “These folks are adding time to their orders, so they have to find new routes, and we want to make sure we’re prepared to service this additional volume.”

Meanwhile, the closure of the Baltimore port could lead to a “nominal” uptick in costs for the products that typically arrive there, such as cars and light trucks, Anderson said. The costs of diverted transportation will be passed on to customers, but it’s not expected to be significant across the U.S., she said.

Another reason prices could go up: It’s contract negotiation season for big retailers and logistics companies. Contracts for the year will be finalized in the next two to three weeks, said Robert Khachatryan, chief executive of Freight Right in La Crescenta.

Disruption gives pricing power to the shipping companies, which could lead to higher rates in the contracts, Khachatryan said. Because the port closure resulted in vessels being stuck and diverted, there is a scarcity of vessel space.

“The carriers had a stronger hand negotiating in the last few weeks. Walmart, Target — they were pushing back on not signing higher rates, but the Baltimore disruption will force their hand to agree,” he added. “It’s not going to be anything like COVID, but it might be a few hundred dollars more per container, which is about a 10% to 15% increased cost in freight.”

The disruption could also mean that shippers rethink their import strategies for the next six months to a year, especially because it could take more than a year to get the Port of Baltimore back into commission, according to Alex Cherin, former Port of Long Beach managing director for trade.

“Depending on fuel prices, if it’s coming from Europe through the Suez Canal, they might save more if other East Coast ports can accommodate cargo, or the rail rates from the West Coast could be a better bargain,” he said. “It’s a pretty fluid situation. In the next three to six months, you’ll see some trickle-down into the Gulf Coast and West Coast ports.”

Much depends on the type of cargo being shipped, Cherin said.

The Baltimore port typically handles major deliveries of automobiles, and other East Coast ports might not have the infrastructure or capacity to do so. Baltimore has been the top U.S. port for passenger vehicles, handling 11% of those imports in 2023, Forbes reported.

Gulf Coast and western ports, such as those in Los Angeles and Long Beach, have more capacity for specialty containers and bulk goods, Cherin said. Shippers might opt to go with those ports because they, like Baltimore, can handle rollon/roll-off ships, designed to carry cars, trucks, buses, trailers and other vehicles.