1 bridge, 8,000 jobs, $2 million wages
Baltimore bridge collapse has big economic impact
The economic impact of the collapse of the Francis Scott Key Bridge in Baltimore – which left six dead and one seriously injured – will be hefty.
The immediate price tag: $2 million dollars in wages a day and 8,000 jobs, according to Transportation Secretary Pete Buttigieg.
“Rebuilding will not be quick or easy or cheap,” Buttigieg told reporters at the White House Wednesday.
The area is critical for America’s economy. The Port of Baltimore is the No. 1 port in the nation for vehicles. Last year, it handled a record 847,158 cars and light trucks, according to Maryland Gov. Wes Moore’s office.
The port offers the deepest harbor in Maryland’s Chesapeake Bay and is the 10th largest in the U.S. based on container imports, according to Moody’s Analytics. It’s closer to the Midwest than any other East Coast port and within an overnight drive of one-third of the nation’s population.
The facility handled 1.3 million tons of farm and construction machinery, the most of any port in the nation, and it employs about 15,000 workers.
Between $100 million and $200 million of cargo passes through the port every day. With that coming to a standstill, many longshore workers could be unemployed, Buttigieg warned this week.
“About $2 million in wages ... are at stake every day,” the secretary said. “These longshore workers, if goods aren’t moving, they’re not working.”
Buttigieg said the Coast Guard, in coordination with the Army Corps of Engineers, will coordinate on the channel cleanup and the reopening. He did not offer a timeline for the reopening of the port or the rebuilding of the bridge, which took five years to finish in the 1970s.
President Joe Biden has called for the federal government to foot the bill to rebuild the bridge. Congress would have to approve it.
But that shouldn’t be a barrier for work to begin soon, Buttigieg said Wednesday. The Bipartisan Infrastructure Law, a sweeping piece of legislation signed into law in 2021, has already authorized funding for the Transportation Department’s emergency relief program.
Companies are coping with the tragedy by rerouting shipments to other East Coast ports. About 4,000 commercial trucks a day used the bridge, and detours are expected to increase delivery times and fuel costs, according to Oxford Economics.
Work is currently taking place on the bridge to offload some of the vehicles stuck in transit, getting them back on surface transportation to go out to other sites.
Oxford Economics doesn’t expect the reshuffling to have any material impact on the nation’s $28 trillion economy or economic growth this year. Experts from both Oxford and JPMorgan Chase said they expect the shifts likely will push up prices, especially for vehicles, but the effects should be “minimal.”
Other supply chain experts, however, said the devastating episode could mean significant challenges.
On the East Coast, only ports in New York; Newark, New Jersey; and Jacksonville, Florida, have the capacity to handle the diverted vehicles as well as the farm and construction machinery that flowed through Baltimore, said Chris Tang, faculty director at the Center for Global Management at the University of California, Los Angeles.
The docks at those ports are already brimming with imported cars and light trucks because of slow sales of electric vehicles and SUVs in the U.S.
“They need to get them off the docks because there’s no room,” Tang said.
To relieve the logjam, manufacturers or dealers could offer car buyers incentives to goose sales and move vehicles off dealer lots, creating space for those rerouted from Baltimore, he noted.
As a result, while prices could edge higher for some vehicles, others could be discounted. The Biden administration, Tang suggested, could offer manufacturers and dealers subsidies to provide the incentives.
At the same time, many ports are still stocked with vehicles from Detroit automakers bound mostly for Europe, Tang said. Those too must be shipped out to make space for diverted cars.
The planning and negotiations required to ease the backlogs could mean delivery delays of several weeks for consumers ordering certain new cars, he said.
“Whether there’s a delay is dependent on the make and model of the vehicle,” said Nathan Strang, director of ocean freight for Flexport, a supply chain management company.
Auto production also could be held up because parts shipped to U.S. assembly plants through Baltimore must be rerouted, Strang said. Since the pandemic eased, most manufacturers have returned to just-in-time inventories that mean limited supplies of parts and materials.
But it’s not just vehicles. The industries impacted are far-reaching.
Sugar shipments may pose a challenge as recovery efforts begin in Maryland. The Domino Sugar Refinery is located in Baltimore’s Inner Harbor. Rerouting massive amounts of imported sugar through other East Coast ports could increase delivery costs and nudge up prices for consumers, Tang said.
Domino said it has enough inventory to deal with at least a monthlong disruption, economists Adam Kamins and Colin Seitz of Moody’s Analytics wrote in a note to clients.
The Baltimore port is also the busiest for imports of gypsum, a material used in drywall, and it handles significant shipments of U.S.-bound lumber.
“An extended disruption could make building more expensive in the near term,” according to the Moody’s authors.
And the port is the second-largest in the U.S. for coal exports, especially to India.
“An extended disruption to this port could mean a supply shock that extends to Asia and potentially reverberates back into global supply chains,” the economists wrote.
Buttigieg on Wednesday said he had a reminder for any member of Congress who is on the fence about funding requests as experts grapple with the economic impact of the Baltimore collapse: “Today this is happening in Baltimore, tomorrow could be your district, and we really need to stand together – red, blue, and purple – to get these things done.”