After the collapse of the Francis Scott Key Bridge in Baltimore, carmakers have announced that they will be rerouting shipments to other cities. Insurers have also warned of claims worth billions of dollars.
After the closure of Baltimore’s port, the US’s largest auto-handling facility and the site used by nearly every major manufacturer, manufacturers have already started diverting their deliveries and exports elsewhere.
They expect that other bottlenecks will cause delays in ports such as Charleston, New Jersey, and New York, due to an increase in traffic and a possible shortage of dockside vehicles handlers.
A director of a European automaker said, “There will be limitations as everyone switches to alternative routes.”
US authorities are assessing the magnitude of the tragedy, which saw the bridge collapse following the collision with the container ship Dali early on Tuesday morning. Six people may have been killed in the accident.
Two container ships were anchored Wednesday morning downstream of the collapsed Bridge, awaiting entry into Baltimore or to be redirected to another east coast port.
On Tuesday evening, federal investigators were allowed to board the Dali to obtain data from the journey recorder. This could help authorities reconstruct the events leading up to the fatal collision.
Baltimore will be the largest US car import port in 2023, with 15 percent of the total. Ports are popular because they save on logistics and have two direct rail connections. According to Stephen Gordon of Clarksons Research, four-fifths (45%) of cars imported into Baltimore were done so upstream from the collapsed bridge.
He said that capacity in other ports along the east coast will now be “a limiting factor” for imported cars. On the east coast, Brunswick, Georgia, Newark, New Jersey, Jacksonville, Florida, and Philadelphia were the next busiest ports for cars.
Gordon stated that “all are smaller than Baltimore, and many have already seen record levels of auto imports in recent quarters.”
Mediterranean Shipping Company, the operator of the largest container fleet in the world, warned its customers that it will take “several” months before the port’s operations return to normal. It also said it would not be using the terminal “for the near future”.
The collapse of the Baltimore bridge could have a significant impact on the US sales figures for one car group. However, it is too early to know how bad the situation will be in other areas.
Dominic Tribe is an automotive analyst with Vendigital. He said that the main problem in rerouting cars to alternative ports was the lack of trained labour and specialist equipment for handling the vehicles. Baltimore has auto processors that can add features to cars and cover minor repairs.
Philippe Houchois said that Jefferies analyst Philippe Houchois expected carmakers to expect a “slowdown” rather than an interruption of deliveries.
Volkswagen and BMW, among others, are not affected by the closure of the Sparrows Point Terminal in Baltimore, which is located on the former site of a steelworks. The terminal remains open because it’s downstream from the bridge.
VW, which shipped 100,000 vehicles last year through Baltimore, stated that it “did not anticipate any impact on vessel operation but there could be trucking delays due to the rerouting of traffic in the region”.
Mercedes stated that the Baltimore port is one of several ports used by its company, along with New Brunswick, New York, and Charleston, South Carolina, as part of a “flexible supply network”.
BMW confirmed that its Baltimore automotive terminal is still open for imports. BMW said it would continue to ship its X5 sport-utility vehicle, manufactured in South Carolina, via the Charleston port.
Insurance Groups are bracing themselves for billions in losses resulting from the accident. Reinsurers will likely be on the hook for the legal fallout, which is expected to last years.
Analysts at Barclays said in a Wednesday note that the insurance claim resulting from this accident could be between $1bn and $3bn. AM Best, an insurance rating agency that specializes in evaluating insurers, said the bill was likely to be in the billions.
The majority of it will be passed on to the ship’s re-insurers. This is spread across a large group, including Axa XL a division from the French insurer. Axa stated that any impact on the group would be “non material”.
Mathilde Jacobsen, AM Best’s senior director, stated that claims could include property damage and cargo damage as well as third-party liability and business interruption. This would “add to the growing challenges of reinsurance accessibility”. In recent years, a pullback in the reinsurance industry has put pressure on primary insurance companies and their customers.
Insurance companies are scrambling to understand the scope and diversity of potential claims. Joe Biden, the president of the United States, has announced that the federal government would fund the reconstruction of the bridge. He added that the government “would not wait” to receive compensation from the private sectors.
Julien Horn is a partner with insurance broker McGill & Partners. He said that the potential liabilities would “go beyond rebuilding the bridge” and include removing bridge debris from the river and ship. He said it would take years to fully understand the impact on the local economy.