Brad’s Note: Early in the morning on March 26, 2024, a ship leaving the port of Baltimore, Maryland, struck one of the top ten longest continuous truss bridges in the world.

Minutes later, the Francis Scott Key Bridge collapsed, plunging construction workers and commuting cars into the icy waters of the Patapsco River.

Our hearts go out to all those affected. And we hope everything is done to prevent future incidents like this.

Today, I am turning things over to Nomi Prins, Editor of Inside Wall Street, to share the impact of this catastrophe on the U.S. economy.

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By Nomi Prins, Editor, Inside Wall Street With Nomi Prins

Last Tuesday, the Dali container ship crashed into Baltimore’s historic Francis Scott Key Bridge.

The ramifications of the bridge’s collapse could linger for years.

The most pressing issues are:

• The lives lost.

• The fate of the 155,000 jobs that relied on Baltimore’s port and bridge.

• Public safety concerns over contaminated water.

• Supply chain and transportation disruptions.

However, this tragic collision and bridge collapse underscores another stark reality.

Neglecting infrastructure needs now only increases future risks and costs.

Let me explain.

The State of Our Bridges

There are 600,000 bridges spanning the U.S. The American Road & Transportation Builders Association estimates that one in three needs repair or replacement.

And of those, more than 42,000 bridges are deemed “structurally deficient,” or “SD.” That means they need significant maintenance to remain safely in service.

The figures get scarier when you think about bridge crossing frequency.

Americans make 167 million crossings daily by way of those “SD” bridges. Doing the math means that 55 million crossings daily are known to be risky.

Some states have a higher percentage of “SD” bridges than others. West Virginia tops the chart. It has the highest percentage of “SD” bridges at 20%.

The next nine states are Iowa at 19%, South Dakota at 17%, Rhode Island and Maine at 15%, Pennsylvania and Puerto Rico at 13%, Louisiana at 12%, and Michigan at 11%.

Only 5% of Maryland’s bridges are “SD.”

But as the Dali situation showed us, it’s not just the percentage of poor-condition bridges that matters. So does their economic importance.

Losing $15 Million a Day

The longer a bridge remains unrepaired or not upgraded, the worse it becomes.

It will cost $2 billion to rebuild the Francis Scott Key bridge. The Biden Administration promised to cover all the construction costs.

But even if Congress agrees, that’s just one set of costs.

This toll doesn’t even count the cost of lost economic activity due to the temporary closure of the Port of Baltimore. That adds up to $15 million a day.

This situation underscores how expensive it is to wait for emergencies to act.

Now, a confluence of events caused the collapse – from tanker failure to the bridge’s inability to withstand the contact.

The Francis Scott Key Bridge met prevailing safety standards. But these standards predated massive container ships. They need to be updated.

And, while the cost of rebuilding the bridge is substantial, it pales in comparison to the economic and human costs of future accidents if we fail to fix it.

Bridge collapses and other infrastructure shortfalls can have devastating consequences. These include deaths, longer commutes, and ongoing supply chain problems.

That’s why investing in infrastructure maintenance and upgrades is not just a matter of safety but a necessary step towards a productive economy.

In other words, the long-term benefits of bridge safety outweigh the short-term financial burdens. That doesn’t mean fixing our bridges isn’t expensive.

Long-Term Consequences

According to the Federal Highway Administration, 300,000 bridges in America are rated “fair.” That includes the Francis Scott Key Bridge.

However, the U.S. built most of these bridges decades ago – from the 1950s to the early 1970s.

That’s why 42,000 are rated “poor.”

The pace of bridge repair has been slow. It takes years to build any bridge. And it could take 75 years to repair all of America’s bridges at the current rate.

That’s despite increased infrastructure spending, including from the 2021 Infrastructure Investment and Jobs Act, commonly referred to as the Bipartisan Infrastructure Law (BIL).

The 2021 BIL allocates $40 billion to bridges over five years. Transportation Secretary Pete Buttigieg said it now funds over 7,800 bridge projects.

However, this funding reflects just 30% of the allocated funds. That’s only 10% of the estimated $319 billion needed for nationwide bridge repairs.

Delayed repairs and upgrades trigger significant longer-term economic consequences.

Meanwhile, accidents like the Baltimore Bridge collapse cause immediate closures and financial losses. Sudden supply chain disruptions drive commodity costs higher.

Let me dig into those details.

Sudden Disruptions = Higher Prices

The Baltimore bridge handles more cars and trucks than any other terminal in the U.S.

It also provides passage for several primary industrial metals and materials such as aluminum, copper, zinc, coal, and cobalt.

Baltimore is the leading thermal coal export port in the U.S. You can see this in the chart below…

Its closure will curb U.S. coal exports to India, China, Canada, and the Netherlands.

Plus, even though tankers will find alternate shipping routes, those might provide less capacity than the Baltimore route. That could cause more supply disruptions and rising coal prices.

The Baltimore port was also the top route for U.S. cobalt imports, handling over half of them in 2023.

Spot cobalt trades in the U.S. were temporarily halted as a result of its closure. Cobalt prices rose to $18-$19 a pound on March 27. That was up from $18-$18.50 a pound on March 25.

Aluminum prices hit five-month highs after the collapse due to the immediate and possible longer-term disruptions. I expect this to continue as suppliers and tankers assess their routes.

What This Means for Your Money

Recall the Fern Hollow Bridge that collapsed in Pittsburgh, Pennsylvania, in January 2022.

After that collapse, I flew to Pittsburgh to survey the avoidable damage.

Federal investigators concluded the cause was severe corrosion in its steel legs. But inspectors and the city failed to do anything to update the bridge until it was too late.

This lack of foresight is a common problem.

If there’s any silver lining to the Francis Scott Key Bridge collapse, it’s a wake-up call to pick up the pace of upgrading our infrastructure. And to cut through the red tape of government funding that’s already been made available.

Meanwhile, the supply disruption will lead to more commodity price inflation, especially for coal, aluminum, and cobalt. The best way to take advantage of this is to buy an exchange-traded fund (ETF) I recommended last week.

That’s the Invesco DB Base Metals Fund (DBB). It captures a basket of those commodities.

Regards,

Nomi Prins
Editor, Inside Wall Street with Nomi Prins