Cars, sugar and cruises: How the Port of Baltimore closure could hurt the economy

London/New York (CNN) — The bridge collapse that has indefinitely halted the flow of ships in and out of the Port of Baltimore could hurt the local economy, strain supply chains and scramble deliveries along the US East Coast.

The Key Bridge collapsed after a container vessel called Dali collided with one of its supports. Dali is operated by Singapore-based Synergy Group but had been chartered to carry cargo by Danish shipping giant Maersk.

The Port of Baltimore said in a post on X that vessel traffic was suspended until further notice, but trucks were still being processed at its terminals.

Seven container vessels were scheduled to arrive in Baltimore through Saturday, according to Judah Levine, head of research at logistics firm Freightos.

“We are omitting Baltimore on all our services for the foreseeable future, until it is deemed safe for passage through this area,” Maersk said in a statement. It said it would discharge cargo destined for Baltimore in other ports nearby, but warned customers that could mean delays.

Closer to the Midwest than any other port on the East Coast, Baltimore is a major hub for vehicles, containers and commodities. Baltimore ranks first among US ports for autos and light trucks, handling a record 850,000 vehicles last year.

“Last year, we received, processed and shipped approximately 100,000 vehicles through Baltimore for US dealers located in the Northeast and Mid-Atlantic US,” Volkswagen said in a statement, adding that its facility is on the seaboard side of the Key Bridge. “We do not anticipate any impact on vessel operations but there may be trucking delays as traffic will be rerouted in the area.”

BMW said its import terminal is also situated outside the harbor entrance and remains accessible. GM (GM) said it was working to reroute vehicle shipments to other ports, while Toyota said the closure would have some impact on exports, but it did not expect significant disruption.

Traffic snarls and shipping congestion

Nationwide Financial markets economist Oren Klachkin said in a note Tuesday that the bridge collapse threatened “to disrupt logistics activity up and down the east coast.”

Part of that could be because of traffic tie-ups on the Interstate 95 corridor, a major artery for traffic along the East Coast.

While many of the 30,000 to 35,000 cars and trucks that used the Key Bridge daily can be rerouted through the tunnels, that will cause traffic delays. And hazardous materials that are not allowed in the tunnels will be diverted on a longer detour.

Rerouting cargo to Philadelphia, Norfolk or the Port of New York/New Jersey could push up trucking and rail prices if the volumes are significant, and could cause some congestion at those alternative ports, said Levine.

“If some congestion does develop, and vessels are kept waiting, it could cause delays for importers using these ports. Congestion could also put some upward pressure on Asia – US East Coast and transatlantic freight rates,” he added.

Freight rates on transatlantic routes are roughly back at 2019 levels following a spike during the pandemic. But prices for trips heading from Asia to the US East Coast are more than double their March 2019 level because attacks on shipping in the Red Sea have forced vessels to divert around Africa rather than using the Suez Canal.

Other East Coast ports should have enough capacity to handle the ships normally calling on Baltimore, said Mark Zandi, chief economist for Moody’s Analytics. But unexpected disruption at those other ports could cause problems.

“This removes the margin for error,” he said.

US economy will be spared

Despite potential for some increased cost of shipping, Zandi said the disruptions aren’t likely to cause problems for the US economy as a whole since the goods are likely to find other ports.

“This specific event should not show up in the national economic statistics,” he said. “It complicates things. But there’s already a lot disruptions in the international supply chain.”

Part of the issue determining the potential added costs to shipping is the unknown of how long the port stays closed.

It’s too early to say when ships will begin calling on the port once again, Maryland Gov. Wes Moore said Monday.

“Right now our exclusive focus is on saving lives, our exclusive focus is on search and rescue,” he said at a news conference.

There is a relatively narrow channel through the center of the Patapsco River which is deep enough to allow large ships such as container ships, cruise ships and car carriers to pass. So clearing that pathway of debris could allow the port to reopen, even as crews continue to work to remove other debris that fell into the river.

President Joe Biden vowed Tuesday that the federal government will assist to get the port reopened as quickly as possible, although he also would not give any time frame for when that might happen.

“Fifteen thousand jobs depend on that port. And we’re going to do everything we can to protect those jobs and help those workers,” he said.

Rebuilding Baltimore

So while it could take years to rebuild the bridge — Moore described the process as “a long-term build” and one without a timeline as of yet, removing the debris is likely to be a priority and could be accomplished much faster.

Overall, Baltimore ranks as the ninth biggest US port for international cargo. It handled a record 52.3 million tons, valued at $80.8 billion, in 2023. According to the Maryland state government, the port supports 15,330 direct jobs and 139,180 jobs in related services.

Baltimore is also the leading US port for farming and construction machinery, as well as imports of sugar and gypsum, and the second in the country for exporting coal.

“While Baltimore is not one of the largest US East Coast ports, it still imports and exports more than one million containers each year, so there is the potential for this to cause significant disruption to supply chains,” said Emily Stausbøll, market analyst at Norway-based shipping analytics company Xeneta.

One of the key manufacturers located at the Baltimore harbor is the Domino Sugar refinery, the 115-year old facility that the company says is the largest cane sugar refinery in the Western hemisphere. One of the oldest manufacturers in the city, its Domino Sugar sign is a well-known Baltimore landmark.

The refinery takes raw sugar imported by ship and refines it into various products. Company officials did not respond to questions about the inventory of raw sugar the refinery has on hand, nor its operational plan during the shutdown of the port.

Baltimore also has a cruise terminal, serving ships operated by Royal Caribbean (RCL), Carnival and Norwegian (NCLH). Cruises carrying more than 444,000 passengers departed from the port last year.

Reporting first quarter earnings Wednesday, Carnival Corp. (CCL) said it estimated the temporary closure of the port could cost it $10 million in full-year profit.

Royal Caribbean said that its port logistics team was working on alternatives for ongoing and upcoming sailings of Vision of the Seas and would communicate any. updates to guests and travel partners once plans had been finalized.

While the collapse of the bridge will cause traffic jams and headaches for the Baltimore region and temporary loss of business at the port, the money that will eventually be spent rebuilding the bridge will provide an form of economic stimulus to the city, even if that doesn’t start anytime soon.

“It’s like a natural disaster. It’s highly disruptive in the immediate term, but then you get rebuilding and it adds to economic activity,” said Zandi.

Hanna Ziady, Peter Valdes-Dapena, Anna Cooban, Rob North and Sugam Pokharel contributed to this article.

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