Baltimore Bridge Collapse: What Supply Chain Leaders Should Be Prepared For

The indefinite closure of the Baltimore port and blocked shipping lanes after a container ship rammed into a highway bridge in the harbor has sent ripples across U.S. supply chains. 

On March 26, the Francis Scott Key Bridge was brought down by a Singapore-flagged container ship named Dali after it lost power.

The accident has brought to a complete halt the movement of containers in and out of the port, which handles imports of car shipments, farm and construction machinery and agricultural products. It’s also a major port for export of coal, metals and minerals, and LNG.

To understand the short-term and long-term impact of the incident on supply chains and shipping, we spoke to David Doran, vice president of consulting for transportation and logistics at GEP. He is an expert on transportation operations and strategy, network and supply chain optimization, global trade management and strategic transportation sourcing.

Q: How do you see the Baltimore bridge collapse incident and its ripple effects?

A: First off, there has been the terrible loss of human life. But it could have been worse.

As for the impact of the incident, its impact on the port of Baltimore is going to be minimal in the long term, for several reasons.

One, it will probably take the U.S. government a year to fix the bridge. 

However, the vessels inside the port will stay there and the vessels that can't get into the port will have to be redirected. Right now, all vessels are redirected.

For example, during COVID-19, some vessels off the port of Long Beach in Los Angeles were held at anchor for 60-90 days. They would redirect and then go to the port of Oakland or the port of Tacoma. So that is a common thing. We skip ports all the time.

In this case, the port of Baltimore is a relatively small port in terms of containerized volume, though it’s a major port for vehicles. But there are alternatives for that too, like the use of other ports for vehicles and for RORO (roll on roll off) containers. Vehicles in their finished form can just be driven onto and off the boat. There are major containerized RORO ports that can handle that.

Q: How does the incident impact shippers?

A: The infrastructure within the port of Baltimore is well-suited to get around this situation. They have to reposition of equipment for shippers geared for Baltimore. When you get there, you've got trucks which could move the containers into other ports; you've got a good rail infrastructure to ship them to long-distance ports. The port of Baltimore is a very stable port. Also, the movements up and down the East Coast are fine. So, in the short term, there is no impact from a supply chain perspective.

But there will be a financial impact because companies have to incur a higher cost to move their products out of there. However, say you have $5 million worth of products in a container. Even if the cost of moving the goods goes up from $2000 to $4,000, it's still a negligible amount compared to the total product value.

The shutting down of the port of Baltimore is not like losing the port of Long Beach. That’s a massive port and would cost too much in infrastructure and warehousing. That would be a major event in the U.S. supply chain.

Q: What should companies do to get around this situation?

A: Let's say you are an automotive company and you primarily ship to Baltimore. We advise all companies that do international air and ocean freight to have more than one port for operations.

Many of our clients are major shippers. So, they might be shipping 500,000 TEU (twenty-foot equivalent unit) containers on the vessels.

The advice we always give them is to mitigate risks and have multiple port options.

Why is that important?

Because you can face unfortunate incidents like Baltimore. There may be strikes. There are things which you can’t control. You shouldn’t always go into a single port. Even if it’s the port of Houston or the port of Long Beach.

All organizations should mitigate risk and expand to multiple ports. Now, by multiple, I don’t mean 20. It's at least two to three ports depending on where your operations are and where your consumer demand is.

Q: Will this incident increase the overall transportation costs?

A: Yes. It has to, directly and indirectly. You have to merge costs. You rented a container. The container comes into the port of Savannah, Georgia [because Baltimore is closed], and gets shipped up to Baltimore and it gets offloaded and transitioned back to Savannah. Now, it's probably going to take 10-12 days instead of the usual three days.

There will also be a temporary increase in fees, like we saw when the Suez Canal was closed or because of the Houthi rebel attacks on ships in the Red Sea.

Q: What will be the level of impact of the rise in freight costs?

A: This won’t have a global impact. It is a trade lane impact. This will be an East Coast blip on the radar for freight costs. But it'll hit the ocean container lines, the vessels or RORO and it will hit the railroads because the charge goes up. It will be the same with trucking because truckers will move longer distances. There will be a temporary shortage of truckers and it will drive the costs up. So there are a number of direct and indirect costs which will see a short-term spike.

On certain trade lanes, I won’t be surprised if there are 20%-30% short-term cost increases.

Q: Aren’t transportation costs are already high due to the Red Sea attacks?

A: Yes, but that issue is far more significant to the shipping industry than this. This is a localized impact. The impact of the Red Sea attacks is massive, not only because it takes longer to get around, but because of the insurance, the cost of crews. Everything goes up by the virtue of that.

Our advice to our clients has always been to mitigate risks by spreading them — this is what has to be done here.