Baltimore's Key Bridge Collapse Impacts Auto Dealerships, West Virginia Coal Exports

 

 

April 6, 2024 - An attractive feature of the Port of Baltimore for coal mining companies is its proximity to the northern Appalachia coal fields in western Pennsylvania and northern West Virginia.

“Mines in this region produce both premium quality metallurgical coal and steam coal with a high heat content,” West Virginia Coal Association President Chris Hamilton says.

Baltimore’s port is second in the U.S. in amount of coal exports. But the March 26 collapse of the Francis Scott Key Bridge and subsequent closing of the Port of Baltimore has created some serious logistics challenges for West Virginia’s coal industry, according to Hamilton.

“The affected mines in this area are some of the largest mines operating in the state and nation,” he said.

A West Virginia University supply chain expert says regional coal producers in the Mid-Atlantic region, including West Virginia, that export through the Port of Baltimore will face significant disruptions.

John Saldanha, Sears Chair in Global Supply Chain Management, director of the Wehrle Global Supply Chain Lab and professor at the WVU John Chambers College of Business and Economics, says there will be challenges for coal operators.

“As long as the Curtis Bay coal-loading quays remain inaccessible, coal operators will have to find alternative transportation to Norfolk or elsewhere, as well as berthing capacity for their contracted ocean carriers to export the freight,” he said.

Hamilton says a quarter or more of all U.S. coal exports use the port for their seaborne coal.

Significant impact on state’s coal industry“The impact on our industry and West Virginia’s economy is significant,” Hamilton said. “West Virginia is the leading export state accounting for upwards of 40% of the total volume of coal leaving the United States for 40 foreign destinations. In fact, coal exports desired all over the world accounts for half of our state’s total output today.”

About 40% of the total volume of coal that goes through Baltimore comes from northern and north central West Virginia, he added.

“All told, there’s about 28 million tons of thermal coal and metallurgical coal involved coming from six or seven major mining companies,” Hamilton said.

He said there are two full-service terminals that receive, store and load coal onto ocean-going vessels at the Port of Baltimore.

“There is the Curtis Bay Coal Piers served by the CSX Railroad and the CONSOL Energy Baltimore Marine terminal served by both the CSX and Norfolk Southern railroads,” Hamilton said. “The impacts are wide-ranging for the entire industry.”

Railroads working on plans to keep miners employed

Hamilton says the railroads are working with coal interests to develop contingency plans in order to keep the mines operating and miners employed.

“Everyone involved in the loading and transportation of coal is cooperating and working on contingency plans and other workable solutions to keep the coal moving and mines from reducing production units,” he said. “There are some utilities in nearby states agreeing to take additional shipments of coal and railroads exploring other route options, but no answers today to prevent the inevitable of mines cutting back on production and possible reduced work schedules.”

Hamilton says a southern rail route through Virginia is the shortest distance to Virginia’s port, but it’s overly congested with competing commerce and commuter trains.

“Western routes through Parkersburg and Huntington to Virginia’s Hampton Roads is considerably longer, but could provide some immediate relief,” he said.

CSX will begin diverting ocean-going freight traffic that normally goes through the Port of Baltimore to the Port of New York and New Jersey as early as next week.

Minor inconveniences for car dealerships

Saldanha says the automobile industry has been affected very differently by Baltimore’s port closure.

“Among U.S. ports, Baltimore’s handles the most wheeled freight, a category that includes automobiles and is also known as ‘RoRo’ or ‘roll-on, roll-off.’ However, thanks to the placement of the Tradepoint Atlantic Terminals, RoRo ships can avoid the site of the bridge collapse,” Saldanha said. “This means that in the case of both container shipping and automobiles headed for car dealerships in the Mid-Atlantic and Midwest, there may be minor inconveniences and cost increases.”

The Port of Baltimore is one of the busiest ports in the country, handling the highest volume of shipments of cars and light trucks, says Chris Miller, an owner of Dutch Miller Auto Group in West Virginia.

“The Baltimore Port is a huge supplier of inventory for the east coast,” Miller said. “We expect a slow in inventory for imports and some domestic manufacturers. Each auto manufacturer will respond differently, but we expect that in three months the supply of inventory will tick back up as manufacturers find better ways go get new vehicles to dealers. Subaru did a heck of a job diverting to different ports.”

Miller said as supply slows, demand for used cars goes up and so do prices.

“But this also means customers trade-ins have more value and they get even more for their trades,” he said.

Supply chain impacts could last for months

There has been no timeline on the reopening of the Port of Baltimore, so worldwide supply chain issues are expected to last for months. Around 90% of the world’s trade is transported on ocean carriers.

“The tragedy in Baltimore is an increasingly common ‘black swan’ event affecting many different supply chains that involve a wide range of commodities, sources, destinations and transportation modes,” Saldanha said. “Those varying factors are going to drive many different outcomes.”

He said the vessel that collided with the Key Bridge, the MV Dali, was a container ship, but Baltimore is a relatively small port for container shipping. It’s only about a quarter of the size of the Port of New York and New Jersey.

“That is fortunate, because — as we all witnessed when the ports of Los Angeles and Long Beach could not keep up with the volume of imports during the pandemic — container shipping is one of the key drivers of the U.S. economy,” Saldanha said. “Due to the Port of Baltimore’s small size, container ships scheduled to call there can easily be diverted to neighboring East Coast ports with the off-season capacity to accommodate the additional volumes before the summer peak.”