Baltimore port closure could trigger freight rate hikes, delays

Logistics specialists on the U.S. East Coast today are scrambling to find new routes for their shipments as maritime traffic into and out of the Port of Baltimore remains suspended until further notice following the collapse of the city’s Key Bridge, although port facilities on land have remained open for truck transactions.

Triggered by the collision of a massive containership with a central bridge pillar early on Tuesday morning, the deadly accident has resulted in an estimated six deaths and will likely cause supply chain delays through the Eastern seaboard. While trucks are still rolling in and out of the port area, the bridge’s collapse will close that section of I-695 for months or years to come, forcing traffic seeking to cross the harbor onto alternate routes via the city’s I-95 or I-895 tunnels, port authorities said. 

Those impacts will play out in the coming weeks, even as emergency efforts continue today to recover victims from the site, maneuver the Maersk/MSC 2M alliance containership Dali away from the wreckage site under the bridge, and then remove sunken bridge girders, passenger vehicles, and shipping containers from harbor waters.

In the meantime, the ripple effects of the disruption will hit logistics flows on several levels, experts say. 

In the short term, supply chain managers must accelerate their orders that get delivered via the affected land route, according to Andrei Quinn-Barabanov, Supply Chain Industry Practice Lead at Moody’s. “The tragic Key Bridge collapse will inevitably lead to delays in deliveries that go through the I-95 corridor between Washington DC and New York or through the Port of Baltimore. Supply chain managers who get their deliveries via either of these routes need to immediately accelerate orders that are likely to be affected. Speed of action is critical,” Quinn-Barabanov said in an email.

In the meantime, the removal of the major I-695 corridor will soon create significant congestion on adjacent road routes, adding travel time to most highways in and around the region and potentially increasing trucking freight rates as carriers avoid the area and local capacity decreases, according to a statement from Kyle Toombs, Chief Strategy Officer at Ease Logistics. That congestion could also cut the effective capacity in the region, since a driver that could previously have taken two or three local loads in a day will now be able to take just one or two, putting pressure on freight rates to increase, he said. 

And over the longer term, maritime freight could face even longer delays. There are currently more than 40 ships remaining inside the port and at least 30 others still signalling their destination as Baltimore, according to Container xChange. Although Baltimore is one of the smallest container ports on the Northeastern seaboard—handling 265,000 containers in the fourth quarter of last year—those effects will still disrupt the movement of containers.

Likewise, there has been a 50% increase in destination changes for expected arrival vessels to Baltimore in the last two days, as ships divert to the ports of Norfolk, Savannah, or even skip the U.S. entirely, according to maritime predictive intelligence provider Windward. Other ships are now slowing down at sea and delaying their planned estimated times of arrival (ETAs), with shipments that are still planned to arrive at Baltimore expected to be delayed by at least 24 days. And still other vessels have dropped anchor until they get further instructions, with at least 12 vessels now anchored around the port of Annapolis and more near Norfolk, Windward said. 

One silver lining to the tragedy is that ocean freight is now in its “slow season” between Lunar New Year and peak season. And with no significant congestion at any of the other major East Coast ports, Baltimore’s volumes should be able to be shifted to other ports without causing too much of a disruption, according to analysis from Judah Levine, Head of Research at Freightos.