New warning from the old bridge

The risks are forewarned

Even before the giant container ship crashed into the Francis Scott Key bridge in Baltimore on March 26, causing the bridge span to fall into the Patapsco River and disrupting cargo operations at a major US port, there was still There are many reasons to worry about the troubles hampering global supply.

Amid the geopolitical whirlwinds, the upheavals of climate change and the ongoing disruptions caused by the pandemic, the risks of relying on ships to transport goods across the planet are clear.

The pitfalls of relying on factories around the world to supply everyday items like clothing and critical items like medical equipment were once clear and relentless.

Off the coast of Yemen, Houthi rebels fired missiles at container ships in what they said was a show of solidarity with Palestinians in the Gaza Strip.

That has forced shipping lines to largely bypass the Suez Canal, the vital waterway linking Asia with Europe, and instead go around Africa — adding days and weeks to passengers. process, while forcing ships to burn more fuel.

In Central America, scarce rainfall, linked to climate change, has limited passage through the Panama Canal. This has hindered the vital link between the Atlantic and Pacific Oceans, delaying shipments from Asia to the US East Coast.

These episodes come amid memories of another recent shock to trade: The closure of the Suez Canal three years ago, when the Ever Given container ship crashed into the waterway and became stuck.

While the ship was grounded and social media was filled with memes about modern life at a standstill, traffic across the canal was shut down for six days, freezing trading causing an estimated loss of value 6 billion USD per day.

A small rupture still brings a big impact

Now the world has got another visual summary of the fragility of globalization through the sudden and shocking removal of a major bridge in a major industrial city with busy ports in America.

The Port of Baltimore is smaller than America's largest container terminals – those in Southern California, Newark, New Jersey and in Savannah – but it is a major component of the vehicle supply chain, serving as a landing zone for cars and trucks. Loads come from factories in Europe and Asia. This is also an important starting point for US coal exports.

Many of those goods may be delayed in reaching their final destination, forcing shippers to plan for replacements and limit inventory. In the age of interconnectedness, problems in one place can quickly be felt more widely. 

“The collapse of the Francis Scott Key Bridge will put pressure on other modes of transportation and port alternatives,” said Jason Eversole, CEO at FourKites, a supply chain consulting firm. Some goods that would have gone through Baltimore likely ended up in Charleston, Norfolk or Savannah.

That will increase demand for road and rail transport services and make getting goods to their destinations more complicated and expensive.

“Even if they clear the debris from the water, traffic in the area will be affected as truck drivers become reluctant to haul goods in and out of the area if prices do not increase,” Mr. Eversole said.

Anxiety is now gripping the supply chain, a topic that is no longer just an issue for trade experts but also a topic of conversation for those trying to understand why they cannot get things done. renovate your kitchen.

Fragile global supply chains

We must not forget the fresh memories of alarming shortages of medical protective equipment during the first wave of COVID-19, which forced doctors in some of the wealthiest countries to go maskless. or gown when caring for patients. Households remember not being able to order hand sanitizer and scrambling for toilet paper, a previously unimaginable scenario.

Many of the worst impacts of major supply chain disruptions have been greatly reduced or disappeared. The price of shipping a container of goods from a factory in China to a warehouse in the US has skyrocketed from about $2.500 before the pandemic, to tenfold during the chaos. Now that price has returned to historical norms.

Container ships are no longer lined up at ports like Los Angeles and Long Beach, California, as they once were as Americans flooded the system with orders for exercise bikes and barbecues during quarantine.

But many products remain scarce, in part because the industry has long adopted a just-in-time manufacturing approach: Instead of paying to stock extra goods in warehouses, for decades companies have Cut inventory to save costs.

They have depended on container shipping and global trade networks to get what they need. That leaves the world vulnerable to any unexpected impacts from cargo transportation.

In America's rapidly growing cities, the housing shortage that has caused skyrocketing home prices continues because contractors still cannot guarantee items such as electrical switches and water meters, which can it took more than a year to arrive.

“The supply chain is still delaying construction,” said Jan Ellingson, a real estate broker at Keller Williams in Casa Grande, Arizona.

Phil Levy, former chief economist at the shipping logistics company Flexport, says it would be a mistake to infer from stubborn container ships that globalization itself is wrong.

“Why don't we do everything in one place so we don't have to worry about transportation?” he said. “Because it will be significantly more expensive. We save huge amounts of money by allowing companies to source components where they are cheapest.”

However, companies are increasingly intent on limiting their exposure to shipping vulnerabilities and geopolitical shifts. Walmart has moved its manufacturing of industrial goods from China to Mexico.

Other US retailers such as Columbia Sportswear are looking for factories in Central America, while Western European companies are focusing on moving production closer to customers, expanding factories in Eastern Europe and Turkey.

In light of these tectonic shifts, the disaster in Baltimore could be a temporary challenge to freight transportation or a lasting challenge. With supply chains, the consequences of any single disturbance can be difficult to predict.

A factory near Philadelphia may have hundreds of raw materials needed to produce paint. However, one delayed material – perhaps stuck on a container ship off the coast of California, or in short supply due to weather-related factory shutdowns in the Gulf of Mexico – could be enough to shut down production. again.

The lack of a single critical part – a computer chip or the part that assembles it – could force automakers from South Korea to the American Midwest to freeze completed cars. in the parking lot, waiting for the missing part.

Somewhere on earth – maybe in America, and maybe on the other side of the ocean – someone is waiting for a container stuck on a ship docked in Baltimore Harbor.

And, that waiting may become more familiar, in the fragile context of today's global trade flows.

Nguyen Khanh