The bridge collapse in the port of Baltimore has the potential to create a domino effect in the auto industry, resulting in inventory shortages and price increases. The incident is expected to make a dent in the broader economy as well.
According to Michel Leonard, chief economist and data scientist at the Insurance Information Institute, the car sector will see a significant disruption similar to that seen during the pandemic, albeit on a smaller scale.
According to his prediction, there will be a period when prices for new cars will go up.
“Consumers will experience that within a few weeks,” he told The Epoch Times.
The impact will likely become apparent in the inflation report for April or May, he added.
Baltimore is the busiest American port for car shipments. The port handled over 847,000 cars and light trucks last year. It is a crucial hub for the imports and exports of several leading brands, such as General Motors, Jaguar Land Rover, Nissan, Toyota, and Volkswagen.
In the early hours of Tuesday, a large container ship struck the Francis Scott Key Bridge, causing a significant portion of the structure to collapse. The Singapore-registered container ship Dali was chartered by Maersk and managed and operated by Synergy Marine Group.
Shipping in and out of the Port of Baltimore was suspended after the collapse of the bridge.
According to Mr. Leonard, the exact duration of the disruption remains uncertain.
“We don’t know how long the bridge will be down, and we don’t know how long shipping will be disrupted.”
As seen during the pandemic years, prices for new cars tend to fluctuate less than those for used cars, Mr. Leonard said.
“The impact will most likely be on the availability of cars,” he added. “What consumers need to be aware of is that it could take them longer to get cars, and how long that will take depends on the bridge.”
Other larger U.S. East Coast ports, such as nearby New York/New Jersey and Virginia, are likely to be able to handle some of Baltimore’s cargo, but their capacities are also limited, according to industry experts.
Most Expensive Marine Claim?
The collapse of the bridge in Baltimore is expected to be one of the greatest losses in the maritime business, as it has caused a complete halt in one of the busiest ports in the mid-Atlantic.
Some even believe that it will be the most expensive marine claim, exceeding the $1.5 billion paid out for the Costa Concordia disaster in 2012, according to Insurance Insider, a digital news platform for the insurance industry.
The liabilities include the bridge collapse, the complicated process of wreck removal, significant disruption to the port of Baltimore, and losses arising from injuries and deaths, according to Loretta Worters, a spokesperson for the Insurance Information Institute.
Insurance Insider reported that Chubb Ltd. is the lead insurer for the bridge, but any claims will probably be subrogated, or transferred, to the shipowner’s insurance. The bridge’s estimated cost is roughly $1.2 billion.
“The price [of the bridge] depends on a lot of factors,” Ms. Worters told The Epoch Times. “This was built in 1977. So, pricing to rebuild a bridge is going to be a lot more expensive today than it was 50 years ago.”
Ms. Worters added that it could take years to resolve the accident’s complex web of claims and liabilities.
“The claim will likely involve several insurers and reinsurers. There’s going to be subrogation and legal issues. So, all that is going to take a lot of time to figure out.”
President Joe Biden said the federal government would fund the reconstruction costs.
“It’s my intention that the federal government will pay for the entire cost of reconstructing that bridge, and I expect Congress to support my effort,” he said in a speech from the White House. “It’s going to take some time, and the people of Baltimore can count on us to stick with them every step of the way.”
President Biden was asked if Maersk or Synergy Marine Group should be held responsible for the damages.
He responded by saying that the government would not delay the bridge’s reconstruction.
“That could be, but we’re not going to wait if that happened. We’re going to pay for it to get the bridge rebuilt and open,” he said.
President Biden also said he would visit Baltimore “as quickly as I can.”
“That’s what we’re working on.”
Andrew Moran contributed to this report.
From The Epoch Times
