The Francis Scott Key Bridge in Baltimore, Marlyand, has tragically collapsed after a cargo ship collided with the structure early Tuesday morning, March 26. The incident has left six individuals who were working on the bridge at the time unaccounted for and reported missing. Flexport Founder and CEO Ryan Petersen joins Yahoo Finance Live to discuss the potential ramifications for shipping companies now that the port is closed.

Petersen highlights that shipping companies are "working overtime... to figure out what to do." He explains that the ship collision will inevitably lead to delays in cargo shipments, drawing parallels to the Suez Canal where cargo remained in "litigation limbo" for over a year. Petersen emphasizes that new routes will need to be determined and "extra coordination" will be required to facilitate the transition of cargo transport from sea to land, describing the situation as "a scramble" to deliver customers' cargo.

While Petersen estimates that rebuilding the bridge itself could take "several years," he expresses optimism that the restoration of the shipping channel might be a more manageable task, potentially taking "a matter of weeks or months." However, he calls this an "adaptive" situation, with most cargo likely to be re-routed to the West Coast and price increases likely to occur.

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Editor's note: This article was written by Angel Smith

Video Transcript

BRAD SMITH: Well, shipping companies scrambling for a plan B after a container ship struck a Baltimore bridge on Tuesday, blocking the only route to one of the busiest ports in the country. Flexport a freight forwarder that coordinates shipping logistics for companies, had some cargo on that fateful container ship.

To break down what the collapse means for supply lines, Ryan Petersen, who's the Flexport founder and CEO is here. Ryan, thanks so much for taking the time. We know it's an extremely busy time for you, for the team, anybody who is coordinating efforts around recovery right now. What is the first thought that went through your head? What are you navigating right now at this instant?

Yeah. Hey, great-- thanks. Good morning. Thanks for having me on. Obviously the first thought is about the rescue workers that are out there and some of the lives that were lost and really the heroic action to save people.

We're working overtime right now on behalf of our customers to figure out what to do about their cargo. We have a few containers that are on the ship just two, actually. Both of them were exports for flexport.org that are headed to Africa. So for nonprofit organizations.

So working with those customers to let them know, they're probably not going to get that cargo back for the next few months. We had 44 containers on the Ever Given-- if you remember that ship that got stuck in the Suez Canal a few years ago. Those customers didn't get their cargo for almost a year as it sat in litigation limbo with the insurance companies.

And so working on contingency plans with those customers. We also have 800-- more than 800 containers bound for Baltimore the Port of Baltimore right now. And we're working with the ocean carriers to figure out where those are going to get dropped off.

We think most of them will be unloaded in Norfolk, Virginia, and will then need to get trucked or railed to their final destination. So a lot of extra coordination that goes into that in terms of arranging-- arranging those trucking services, customs clearances et cetera. So it's kind of a scramble to work on behalf of the customers right now, is the main thing that's happening across the shipping industry really.

SEANA SMITH: Ryan, what is the ability look like when you take into account the ports here in New York, New Jersey, down South in Virginia, the ability to take on even more cargo volume? What does that look like?

And as you're trying to navigate this very uncertain environment right now, what does that then longer-term do you think supply-- supply disruption potentially look like here given the fact that this port has been suspended indefinitely?

RYAN PETERSEN: Yeah. well, it'll depend on how long this lasts. It's going to take many years probably to rebuild that bridge-- several years. I wouldn't want to speak to that, but I suspect they'll be able to open the channel and allow the port to reconnect with the global ocean and in a matter of weeks or months.

The salvage companies that get in there, they kind of work miracles from my perspective. So I suspect they'll be able to start moving some of that rubble out of the way and get the channel reopened.

The ports are probably in an OK position on the East Coast. What's happened this year, because we've had so much disruption to the shipping-- main trade lanes, starting with the Red Sea with the missiles that have been hitting these ships in the Red Sea.

Well, that's the primary route by which container ships move from Asia to the East Coast of the United States and that's been disrupted. They're going around the Cape of Good Hope. It takes a lot longer.

We also have a disruption-- a congestion at the Panama Canal, where it's only operating at about 2/3 of its capacity, and that's the secondary route by which container ships arrive on the East Coast. So a lot of volume has already shifted from the East Coast to the West Coast as a result of those two factors.

And then there's a third one that's coming up. In September 31 of this year. The ILA-- that's the labor union that operates the ports on the East Coast, their union contract expires on September 31 of this year.

And so there's a lot of uncertainty about whether there will be slowdowns or even a strike at the end of the year. And that has a lot of companies worried about shipping to the East Coast and have started to proactively shift volumes where they can to the West Coast and then say, hey, we'll just bring it across the country by rail or by truck, which costs more, but avoid some of that uncertainty.

So I think this Baltimore situation is just going to compound that. It's going to cause more companies to shift to the West Coast. It does cost more, but it's faster and more reliable. And so because of that, there is probably enough capacity in Norfolk and New York and even in Philadelphia to pick up the slack from Baltimore.

But I don't know, it's a lot of volume to move overnight and hopefully those ports are ready to staff up and have the union workers and the trucks and everything else that goes into it to meet the demand.

We've seen during COVID in 2021 and 2022, where you had all that congestion on the West Coast that an increase of 10% or 20% of container volume can cause the entire system to come to grind to a halt. And so we're hoping that we're able to handle this capacity and keep the cargo flowing.

BRAD SMITH: Ryan, all of these things accounted for redirection that you're talking about, labor disputes and negotiations that could be coming forward as well. What type of cost are you anticipating could be increased in terms of the comparison to the existing expense profile that you have?

RYAN PETERSEN: Yeah, I mean, it's really a complex adaptive system. It's hard to pin down-- especially this soon after an incident like this to get a hard number on things. But you can-- rule of thumb ballpark things is that, well, it costs almost twice as much to truck something across the country from the West Coast to the East Coast as it does to ship it from China to the West Coast.

So it can be a big increase in cost. It'll depend on how much volume we see shifted to the West Coast, how much impact that is. But a high price of shipping flows directly into the cost of goods that people pay every day.

We saw during the pandemic when prices surged-- the price of ocean freight went up about 10 times in the spot market if you didn't have a long term contract. That was leading in our economists estimate to about 3% impact on goods inflation. 3% increase in the prices that we all pay for goods that are imported, which is a huge percentage of the goods that we consume.

So I wouldn't expect anywhere near that level of inflation impact. But it could be if certainly half a percent or something like that, if this lasts and if the industry isn't able to handle the surging volumes and we start to get congestion and delays.

SEANA SMITH: Ryan Peterson, we really appreciate you taking the time to join us here on Yahoo Finance this morning. Founder and CEO of Flexport, thanks so much.