HAMBURG, July 14 (Reuters) – Low water levels on Germany’s Rhine river are raising cargo transport costs and disrupting logistics, adding pressure to Germany’s fragile economic recovery, analysts said on Tuesday.
The Rhine is crucial for transporting raw materials, fuel products and manufactured goods. The heatwave and reduced rainfall this summer in western Europe caused a sharp fall in Rhine water levels, with cargo ships often only sailing about 20% full.
Germany’s Thyssenkrupp Steel told Reuters the worsening low water is now affecting the supply of raw materials to its Duisburg plant and it has “slightly reduced blast furnace production because of the somewhat restricted supply of raw materials.”
The company’s own barge operations have been suspended because of the low water levels and it is chartering vessels with a shallower draught. “At present, supplies to our customers are not at risk,” a spokesperson said.
Most vessel sailings continue, but operators impose shallow water surcharges on freight prices to compensate for vessels not sailing fully loaded, increasing costs for cargo owners. Loads are spread among several vessels, also increasing prices.
Deutsche Bank Research economist Marc Schattenberg said: “Initially, this is likely to become noticeable through higher transport costs and adjustments to logistics routes”.
RISK TO NASCENT ECONOMIC RECOVERY
Germany’s industry has recently shown signs of improvement, with factory orders, exports and industrial production posting stronger than expected gains in May. However, transport-related supply chain disruptions would be “an unwelcome headwind for a stabilising industrial sector”, he said.
Schattenberg added that many companies were likely to be better prepared than in previous low water crises because they had invested in more resilient supply chains.
Germany’s inland waterways agency expects the water level at Kaub, a key Rhine bottleneck near Koblenz, to fall below 50 centimetres on Tuesday. The record low at Kaub was 25 centimetres in October 2018.
At current levels, a typical Rhine container ship with capacity for 500 twenty-foot equivalent units, or TEUs, can pass through the Kaub section carrying less than one fifth of its normal load, Deutsche Bank said.
“If the Kaub water level falls to around 40 centimetres or below, cargo shipping is usually suspended,” Schattenberg said.
Low water could threaten logistics of refined fuel from oil refineries, said Thomas Puls of the German Economic Institute (IW).
German oil refineries mostly receive crude oil by pipeline but use the Rhine for high-volume distribution of refined products. For a Rhine closure, he estimated about 3,000 additional road fuel tankers would be needed daily. Even if they could be found, extra transport costs could threaten increases in western German petrol station prices.
Germany’s chemical industry is better prepared today for heatwaves and low water levels than it was during the drought in 2018, said Wolfgang Grosse Entrup, CEO of German chemical industry association VCI.
“For now, the effects remain manageable, partly because production is running at a low level,” he said.
(Reporting by Rene Wagner, Tom Kaeckenhoff, Patricia Weiss and Michael Hogan, Editing by Louise Heavens)
Comments