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Baltimore braces for economic hit, fearing port closure for months

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BALTIMORE – Trucks continue to roll down Holabird Avenue while freight trains honk their horns. But the lunchtime crowd at Vinny’s Café, a popular Italian restaurant favored by dockworkers, is lighter than usual. And people here admit to a discomfort that they compare to the early days of the coronavirus pandemic.

Less than a week has passed since a massive ocean freighter slammed into the Francis Scott Key Bridge, blocking Baltimore Harbor behind a barricade of twisted steel and broken concrete.

With the shipping channel clogged with debris, people and businesses who rely on the port for their livelihoods are left in a bind. The docks will soon be empty of goods and there will be none left soon. Logistics and freight companies as well as retail businesses are preparing for a long interruption of port operations which could have serious financial consequences.

“We think it will take six months. That’s what we tell our shippers,” said Rich Kane, 54, owner of trucking, warehousing and freight brokerage companies that serve the port under the Kane Group.

Although it doesn’t take that long, clearing the stricken ship and ruined bridge won’t be quick or easy. The temporary halt to goods could become one of the biggest blows to Baltimore’s maritime prosperity since the city became a commercial gateway with the tobacco trade in the 1600s.

For the United States as a whole, the port closure will have “no significant effect” on economic growth or inflation, according to Capital Economics. But it is a cataclysm for the regional economy and for the hopes of creating worker jobs. Some freight and transportation officials have compared the situation to other epic disasters.

“To me, it’s like Covid or 9/11, the two things that basically stopped us in our tracks,” said John Schmidt, chief operating officer of Kane’s Capitol Express unit. “The longer this goes on, the worse it will get. »

A maritime crane capable of lifting 1,000 tons arrived in Baltimore on Friday, the first step toward clearing the tangle of ships and bridges blocking the Patapsco River that connects the port to the Chesapeake Bay.

Work above and below water is expected to be dangerous and time consuming. Once the debris is cleared, a multi-year project to erect a new bridge will begin. Cargo ships will be able to call at the port while reconstruction takes place, transportation experts said.

“I’m pretty sure once this channel opens, the port will be able to handle all the business it has handled in the past,” said Jim White, who retired in 2019 after 18 years as as executive director of the port. “The problem right now is that no one can know how long the channel will be closed.”

Reopening cannot come too soon. Without the arrival of cargo ships in the foreseeable future, port activity begins to falter.

The number of trucks calling at Seagirt Marine Terminal, one of the port’s five handling centers, has fallen every working day over the past week. Thursday’s 2,889 truck transactions recorded were nearly 20 percent lower than Monday’s, according to the facility’s website.

Diversified operations like the Kane Group, with multiple revenue streams, are well-positioned to weather what’s coming. Small trucking companies that exclusively transport goods short distances to and from the port, called “drayage,” will suffer, as will start-up companies.

Arnez Harrison, 41, and three partners spent 18 months researching the market and raising $300,000 before launching HHAL Logistics last summer. One of the few minority-owned companies in the trucking industry, it was struggling to become profitable before the bridge collapse.

“It could be devastating for us. I’m very worried, very worried,” he said.

Harrison grew up in a working-class family in Baltimore. He spent a few years bouncing between pre-law and pre-med before teaching in Anne Arundel County. He later took a job with a mail consolidator, where he still moonlights while growing the new business.

HHAL Logistics is his chance to be his own boss and maybe make some money. He’s in no mood to give up.

“Before this, we knew we had to diversify to survive,” he says, leaning against a lime green forklift. “Now we have to go a little faster so we can stay afloat.”

Reminders of Baltimore’s faded industrial prowess dot the harbor area. A General Motors plant that employed several thousand workers near the water closed in 2005. Less than 10 miles away is a former Bethlehem Steel plant in Sparrows Point.

Baltimore’s logistics hub has been under pressure in recent years. Maryland has lost about 3,100 trade and transportation jobs since 2019, even as employment in this sector nationally has increased by nearly 5%.

The bridge collapse came as the port was coming off a record year for cargo handling, awaiting infrastructure improvements that should make it more competitive.

Instead of capitalizing on this success, the port is now virtually frozen. Cargo carriers such as Maersk and Evergreen have begun diverting container ships to ports in New York, New Jersey and Norfolk. In most cases, the companies owning the goods will be responsible for the cost of transporting them to Baltimore by truck or rail from the new destination port.

On Wednesday, Kane held a Zoom call with 10 of his largest shippers and got their agreement to pay a temporary fee to cover the added cost of any new routes for their goods. Given all the uncertainty, it will be a few weeks before he knows how much to charge.

Kane, whose family has been in the transportation business since 1918, said one customer ordered five times his normal amount of goods, fearing that congestion at other ports would deprive him of what he needed.

“They’re stocking up on inventory. Right now shippers don’t know what’s going to happen,” he said.

Shipping carriers, like airlines, offer scheduled services to specific destinations. Once they change those schedules — and shippers get used to moving their goods through a different port — Baltimore may have trouble regaining the business it lost.

Contracts to handle cargo originating from or destined for customers in the Baltimore area would quickly return once the port resumes operations.

But more than half of the goods that arrive in Baltimore in a typical year are headed to more distant places like Chicago, according to John D. Porcari, Maryland’s former transportation secretary. This “discretionary” cargo could easily flow to another East Coast gateway, especially if the price is right.

“What ports do best is steal discretionary cargo,” said Porcari, who was President Biden’s ports envoy during the pandemic supply chain crisis. “In the long run, Baltimore could lose some discretionary merchandise – and that hurts.”

Craig McGraw fears a contract he hoped to get from a Houston power company might be part of the work awaiting him elsewhere.

McGraw, 42, vice president of sales and marketing for Trans American Trucking Service, which specializes in handling industrial components, recently bid on a job to truck the Houston company’s equipment from Baltimore to Ohio. The components will be used in Intel’s $20 billion semiconductor factory being built northeast of Columbus. This work was due to start in August. The fate of the contract is now unclear.

McGraw’s father, Ron, now 83, started the company in 1976 with a single flatbed trailer. Trans American, headquartered in South Plainfield, New Jersey, now has about 50 drivers, split equally between staff and owner-operators, handling loads coming from the Port of Baltimore.

Although McGraw expects revenue to decline starting next month, McGraw has no plans to reduce his workforce. During the 2008 financial crisis, everyone – including top executives – took a significant pay cut, he said.

“We are proud that we have never laid anyone off,” he said.

Yet one customer decided to ship their coiled electrical cables through the Port of Newark while Baltimore is on the sidelines. And others will certainly follow.

“If they feel comfortable, will it ever come back to Baltimore?” he said.

After more than four centuries as a commercial center, Baltimore has reason to be optimistic.

The port is one of four East Coast ports with the 50-foot channel depth needed to accommodate the “New Panamax” class of ships, which carry more than 10,000 shipping containers.

Due to its location on the Patapsco River at the top of the Chesapeake Bay, Baltimore is further inland than any other rival port and therefore closer to major Midwestern transportation hubs like Chicago. Baltimore is also less congested than alternatives such as New York-New Jersey.

A major expansion of the city’s Howard Street Tunnel to accommodate freight trains carrying double-stacked shipping containers, scheduled to open in 2027, will also make Baltimore a more attractive freight conduit. State officials expect the project to create 7,300 permanent jobs.

Many could become customers of Vinny’s Café, located about a mile from the port. For 25 years, the family restaurant has been doing thriving business with the port, particularly in event catering. Last week, the impact of the bridge accident could be seen in the small crowds that showed up for the luncheon.

Asked about the impact of a long closure, owner Vinny Scotto, 65, grimaced. “It’s not going to be pretty, like a blocked artery in the heart,” he said. “It’s not going to be good for this side of town.”

His son, Fabrizio, who manages the cafe, says he sympathizes with the port workers, but he is confident the restaurant will make it through tough times. The Scottos recently opened a renovated dining room, complete with a gleaming horseshoe-shaped bar, that attracts good evening business.

“It’s heartbreaking,” Vinny said. “I used to live across the street. I see the bridge every day.

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