On the morning of March 26th, the Dali, an enormous container ship, crashed into one of the supporting structures of Baltimore’s Francis Scott Key Bridge, which collapsed soon after. This tragic incident killed six workers on site and caused at least one major injury, along with an economic impact that spans the globe. The Port of Baltimore must remain closed for a few more weeks while the wreckage is cleared, which will require at least seven container ships and hundreds of crew. That means the supply of products like cars, coal, and even tofu could be disrupted as traffic at the port stays still.
Baltimore is the nation’s number one destination for automobiles: in 2022 alone brands like Mercedes-Benz and Mazda imported and exported more than 750,000 vehicles from the port. Although most of the top companies have enough stock on hand to stay afloat in the short term, experts predict they will inevitably feel the effects of a supply crunch down the line. “It’s too early to say what impact this incident will have on the auto business, but there will certainly be a disruption,” said John Bozzella, president of the Alliance for Automotive Innovation. While coal companies plan to keep supplies steady by rerouting through other ports, the soybean industry may do the same by shipping through neighboring harbors in Norfolk, Virginia, and Savannah, Georgia.
Then there is the matter of paying for clearing and rebuilding the bridge, which once carried more than 11 million cars per year across the Patapsco River. One insurance firm estimates that the disaster could cost as much as $4 billion in insured losses, which would fall on the company International Group of P&I Clubs. This organization insured the Dali and is therefore responsible for its negligence, the damage to the bridge, and the subsequent wreckage removal. Of course, that will not likely be the end of the insurers’ woes. “There will be worker compensation lawsuits, there will be life insurance settlements, and, of course, the boat insurance will be in play,” said insurance analyst Marcos Alvarez. “And this is happening in one of the most litigious jurisdictions in the world, the U.S.”
Questions:
- How will the bridge collapse in Baltimore affect global trade for products like cars and soybeans? What will be the difference in the short and long terms?
- What sort of risks do insurance firms take on when they insure container ships like the Dali?
Sources: Federica Cocco, “Baltimore Bridge Collapse Could Yield the Largest Maritime Insurance Losses,” The Washington Post, April 10, 2024; Lori Ann LaRocco, “Dali Container Removal Will Take Weeks, a Key to Port of Baltimore Reopening,” CNBC, April 8, 2024; Rachel Lerman, Hannah Dormido, Jeanne Whalen, Luis Melgar and Laris Karklis, “See How the Key Bridge Collapse Will Disrupt the Supply of Cars, Coal and Tofu,” The Washington Post, March, 27, 2024.