Carmakers are preparing for months of lower sales as they reroute shipments away from Baltimore following the collapse of the Francis Scott Key Bridge, while insurers have warned of multibillion-dollar claims stemming from the disaster.
Manufacturers are already diverting deliveries and exports to other sites after the closure of Baltimore’s port, which is the largest car-handling terminal in the US and used by almost every major manufacturer.
But they expect other bottlenecks to force delays at ports including Charleston, New Jersey and New York due to increased traffic, and a potential shortage of dockside vehicle handlers.
“There will undoubtedly be constraints as everyone moves to alternative routes,” said a director at one European carmaker.
The warnings of bottlenecks come as US authorities assess the scale of the disaster, which saw the highway bridge collapse after being struck by the container ship Dali in the early hours of Tuesday morning. Six people are thought to have died in the accident.
On Wednesday morning, two container ships could be seen anchored downstream of the collapsed bridge, waiting to enter Baltimore or be redirected to other east coast ports.
Federal investigators were cleared to board the Dali on Tuesday evening, obtaining data from the voyage recorder that could help authorities piece together the events that led to the deadly collision.
Baltimore is the US’s largest car import port, accounting for 15 per cent of the country’s total in 2023. The port is popular with carmakers because it is far inland, saving logistics costs, and connected to two direct rail links. Four-fifths of the cars imported through Baltimore did so upstream of the collapsed bridge, according to Stephen Gordon, managing director of Clarksons Research.
He said capacity at other ports on the east coast would now be a “limiting factor” for importers. The next busiest car ports on the east coast were Brunswick, Georgia; Newark, New Jersey; Jacksonville, Florida; and Philadelphia.
“All are smaller than Baltimore and many were already seeing record levels of car imports over recent quarters,” Gordon said.
Mediterranean Shipping Company, operator of the world’s largest container ship fleet, has warned customers it will be “several months” before operations at the port return to normal and said it would be omitting the terminal from its services “for the foreseeable future”.
One car group that exports to the US through Baltimore said the bridge collapse could measurably affect its US sales numbers in the coming months, although it warned it was too early to say how severe the bottlenecks would be elsewhere. Another significant European car exporter has warned dealers to expect “delays” to vehicle shipments.
“The main issue with rerouting to alternative ports is the lack of skilled labour and specialist equipment in handling the cars,” said Dominic Tribe, an automotive analyst at Vendigital. “Baltimore has a few auto processors on site that help add features and can cover minor repairs.”
Philippe Houchois, analyst at Jefferies, said carmakers expected a “slowdown rather than interruption” to deliveries.
Several European carmakers including Volkswagen and BMW are unaffected because Baltimore’s Sparrows Point terminal, on the site of an old steelworks, is downstream of the bridge and remains open.
VW, which last year shipped about 100,000 vehicles through Baltimore, said it did “not anticipate any impact on vessel operations but there may be trucking delays as traffic in the area will be rerouted”.
Mercedes said the Baltimore port was among several used by the company alongside Brunswick, New York and Charleston, South Carolina as part of its “flexible supply chain network”.
BMW said its automotive terminal in Baltimore remained accessible for imports. It would continue shipping its X5 sport utility vehicle, made in South Carolina, through that state’s Charleston port.
JLR, which uses the main Baltimore terminal, said its vehicles were affected and that it was “assessing alternative routes into the country”. The company already uses Brunswick port, and Hueneme in California.
Insurance groups are now bracing for billions of dollars of losses stemming from the accident, with reinsurers likely to foot the bill in a legal fallout expected to last for years.
The insurance claim stemming from the accident could reach $1billion to $3b (NZ$1.66b to NZ$5b), analysts at Barclays wrote in a note on Wednesday. AM Best, a specialist insurer rating agency, also said the bill would probably run into the billions.
Most of it is expected to flow through to the ship’s reinsurers, which is spread among a large group including Axa XL, a division of the French insurer. Axa said any impact would be “non-material” at group level.
Claims could span property and cargo damage, third-party liabilities and business interruption, said Mathilde Jakobsen, AM Best senior director, and would “serve to add to the increasing challenges in reinsurance availability”. A pullback from the reinsurance sector in recent years has piled pressure on primary insurers and their customers.
Insurers are rushing to get their head around the size and variety of the potential claims. President Joe Biden has said the federal government will fund the bridge’s reconstruction, adding that it was “not going to wait” for compensation from the private sector.
Julien Horn, a partner at insurance broker McGill & Partners, said the potential liabilities “go beyond the rebuilding of the bridge and will need to consider removing the bridge debris” from the ship and river. It would take “years to fully comprehend” the disruption to the local economy, he said.
Written by: Peter Campbell, Ian Smith and Robert Wright in London, Arjun Neil Alim in Frankfurt and Aime Williams in Baltimore.
© Financial Times
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