Rain has arrived in Europe. Some companies say that recent rainfall has been enough to replenish parts of Europe’s most severely affected rivers to water levels enough for the resumption of normal sailing operations, and bodes well for fall sailings.
Yet, this might not be the case with the Rhine River.
Bastien Dion, head of the Strasbourg-Rhine unit for Voies Navigables de France, has said he is not overly optimistic about the rain: “We can’t say that this is enough to put an end to the drought episode”.
For the past two months, the drought has been affecting all the main rivers of Europe.
On the Rhine – Europe’s largest commercial river with 300 million tonnes of goods transported each year – the loading of barges has been reduced by three-quarters to avoid running aground and paralyzing all river traffic.
Dion has remarked that barges have been loaded with between 400 to 500 tonnes as opposed to the usual 3,000 tonnes, to avoid getting stuck at the town of Kaub – the lowest point on the river.
As a result, the price of goods has risen and shipping traffic has fallen by 7% compared to last year.
Approximately 50 ships pass through the lock each day – instead of the average of 70 – and if the cost becomes too high in relation to the transport, the carrier or client may decide that shipping goods on the river are no longer profitable.
However, the drop in Rhine’s water level is not a new problem – in 2018, the level was even lower.
Although, at the time, it wasn’t as big of a deal because the market for raw materials was relatively calm and supply chain interruptions were minimal until the Covid-19 outbreak.
According to reports, shipping on the Rhine has doubled during the past 50 years. The number of goods moved by inland waterways has increased tremendously as a result of the development in global trade over the past 20 years.
Trucks, which are typically more expensive than boat transportation, are already profiting from the increase in the cost of waterways.
But they can transport far fewer goods and are far more polluting – and a barge can carry the equivalent of nearly 60 trucks.
Why is Rhine River shipping important?
The Rhine is an important shipping route for a variety of goods, including wheat, chemicals, and coal. It runs from the Swiss Alps to the North Sea through industrial areas of Germany.
It serves as a vital link between industrial producers and international export terminals in North Sea ports like Rotterdam and Amsterdam, while canals and other rivers connect the Rhine to the Danube and enable shipping to the Black Sea.
What happens when water levers are down?
To avoid running aground when water levels drop, cargo vessels must sail with a lighter load.
Recently, some shippers claimed they were only loading around 25% as much freight onto ships as usual.
This results in the need for additional ships to transport cargo that could previously fit on a single ship, raising the cost of freight. Typically, shipping companies can pass on increased expenses to cargo owners, who then pass those prices forward to customers.
What is the impact on Germany’s economy?
The German economy is already struggling with high inflation, supply chain delays, and skyrocketing gas costs as a result of Russia’s invasion of Ukraine in February. Shipping bottlenecks are an additional burden on the German economy.
According to economists, the Rhine shipping slowdown might reduce this year’s overall economic growth in Europe’s biggest economy by as much as 0.5 percentage points.
For chemical industries like BASF (BASFn.DE), the low Rhine water levels are anticipated to result in higher expenses and possibly reduced production.
Coal power plants, which are once again popular as a substitute for Russian gas, are also experiencing a shortage of fuel because vessels can’t transport enough coal. Utility Uniper (UN01.DE), which accounts for 4% of Germany’s coal-generated electricity, has warned of output reductions at two of its units.
What is being done to reduce the situation?
Companies are shipping more goods by truck or train to make up for the shortfall on the Rhine.
Germany plans to give the transportation of materials and equipment essential for energy production priority on the country’s rail networks should low water levels on the Rhine fall further. Shipbuilders have also been working on vessel designs that can cope with lower water levels.
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