![“Businesses we talked to said they can manage a short-term disruption but if the effort to reopen the [Key Bridge] channel takes longer, they then expressed greater concerns about lead times and increased costs,” the Richmond Fed said in its report.](https://martav.shop/wp-content/uploads/2024/04/bridgecleanup.jpg?w=910&h=511&crop=1)
Disruptions in the Red Sea and the tragic collapse of Baltimore’s Francis Scott Key Bridge have caused some shipping delays throughout the U.S., according to a report from the Federal Reserve.
But luckily for U.S. consumers, the incidents have not resulted in widespread price increases, the central bank said in its Beige Book. The Fed called the month’s price raises “modest,” running at the same pace as the bank’s prior report released in March.
Of the Federal Reserve’s 12 regional U.S. districts, the banks of New York, Richmond, Va., Chicago and St. Louis all referenced some impacts from the March 26 bridge collapse in Baltimore. The banks of Chicago and St. Louis also said local businesses had been impacted by the Red Sea disruption, with the former saying a heavy machinery contact said some inputs were in short supply because of reduced shipping volumes through the Suez Canal.
Related Stories
Richmond, the district where Baltimore is located, so far has been impacted the most by the Key Bridge incident. Port activity declined due to Baltimore’s closure, despite the district also being home to gateways in Virginia, North Carolina and South Carolina.
“Businesses we talked to said they can manage a short-term disruption but if the effort to reopen the channel takes longer, they then expressed greater concerns about lead times and increased costs,” the Richmond Fed said in its report.
The bridge collapse, despite closing off access to the Port of Baltimore, hasn’t made much of a wider impact on freight rates into the U.S. except for European routes into New York, which have held up.
According to the Drewry World Container Index (WCI), spot freight rates from Rotterdam to New York have increased 0.4 percent to $2,291 per 40-foot container since March 21, the week prior to the crash. In the week prior to Thursday, the rates jumped 3 percent.
In line with the slight jump, one contact of the Chicago Fed said “ocean freight charges were up some” after the bridge’s collapse, despite ground freights declining.
On the other hand, Shanghai-to-New York shipments are still falling, having declined 17 percent per container since the week prior to the incident, and 5 percent week over week to $4,453.
Across all eight major trade lanes, Drewry’s WCI composite dipped by 3 percent week over week to $2,719 per 40-foot container, and has decreased nearly 10 percent since March 21.
Shipments originally destined for Baltimore are now being rerouted primarily to ports in New York (41 percent), Norfolk, Va. (30 percent) and Newark-Elizabeth, N.J. (10 percent), according to recent data from Project44. Despite dwell being stable at the ports handling the additional volume, the rerouted containers are seeing higher dwell rates (five days) than the port median (three days).
With that in mind, the St. Louis Fed said one firm described a two-week delay on a large equipment order due to the Key Bridge collapse.
Already having established two temporary, alternate channels for vessels clearing debris as part of the Unified Command recovery team, the U.S. Army Corps of Engineers expects to open limited shipping access to the Port of Baltimore by the end of April, and full access by the end of May.
Other districts of the Federal Reserve shared that symptoms of the freight recession persist.
“A few freight haulers continued to lower their rates, and one contact said that they are at ‘a point where we can barely find any profit in moving freight,’” said the Federal Reserve Bank of Cleveland.
In Richmond, the Fed said industry oversaturation in the truckload segment pushed rates down, while less-than-truckload firms were able to negotiate flat-to-slight increases in contract rates due to decreased capacity.
And in Atlanta, businesses seem to be calling the bottom of the freight recession.
“Third-party logistics (3PL) contacts noted that both demand and shipping rates appeared to have bottomed out following what was characterized as an 18-month freight recession,” the Atlanta Fed said. “Cargo volumes at district ports were generally below 2023 levels and are expected to slow further as freight normalizes down from inflated levels in 2022.
The Federal Reserve publishes its Beige Book eight times per year, with each of 12 districts gathering anecdotal information on current economic conditions through reports from bank and branch directors and interviews with business contacts, economists, market experts and other sources.
