Lower Rhine water levels weigh on German economy
Already prepared for recession and winter energy shortages, German businesses are grappling with the lack of another precious commodity: rain.
Weeks of scorching temperatures and low rainfall this summer have drained water levels on the Rhine, the country’s trade artery, causing shipping delays and causing freight costs to more than quintuple. Flowing from the Swiss Alps to the North Sea via German industrial centers, the river is a major route for products ranging from grain to chemicals to coal.
Economists estimate the disruption could slash Germany’s overall economic growth by up to half a percentage point this year. Barges like the Servia, a 135-metre vessel carrying iron ore from the port of Rotterdam to German steelmaker Thyssenkrupp’s Duisburg factory, can only load 30-40% of their capacity or risk running aground.
On a trip this week, laden with small heaps of iron ore, the boat often skirted the groynes along the bank where the water was deepest. In some places the Rhine was so shallow that other ships were moored well below the quays where people walk. Signs warning people of dangerously high water were sticking out of the riverbed and rocks were exposed.
“Normally you have more than two meters under the ship, but now you only have 40 centimeters in some places,” Servia captain Peter Claereboets told Reuters. “And then for us, the challenge is to pass these points without touching, without damaging the ship.” “Due to low water levels, the shipping route narrows and we start traveling like trains, in convoy,” he added.
Other boats, unable to cope with shallower waters, ceased sailing altogether. The resulting bottlenecks are another drag on Europe’s biggest economy, which is struggling with high inflation, supply chain disruptions and soaring gas prices after the invasion of Ukraine by Russia in February.
Freight charges on the Rhine rose to around 110 euros ($112) per ton, from around 20 euros in June for a liquids tanker barge. Chemicals group BASF said last week it could not rule out production cuts. Rating agency Moody’s said low Rhine water levels would increase costs for chemical companies, especially those with production facilities in the Upper Rhine, and could lead to production cuts.
Coal-fired power plants – now fashionable as an alternative to Russian gas supply – are facing supply shortages with ships unable to take on enough coal. Utility Uniper, which turned to the German government for a bailout in July after being one of the first victims of the energy crisis, has since warned of possible production cuts at two of its plants which represent 4% of the coal-fired electricity capacity in Germany.
To the south, Switzerland is freeing up 245,000 cubic meters of its oil reserves to overcome the supply constraints caused by the low level of the Rhine. GROWTH AT RISK
The situation prompted comparisons with 2018, when Rhine levels also plunged. “It may not be a mistake to assume at this stage that the low tide will weigh on GDP by a quarter to half a percentage point,” said Jens-Oliver Niklasch, economist at LBBW.
“I think it’s more dangerous this time because the supply situation is tight anyway and coal-fired power plants in particular, which are extremely important for power generation, are likely to be hit harder.” Stefan Schneider, an economist at Deutsche Bank, expects the German economy to fall into a mild recession from the third quarter and for overall growth in 2022 to be 1.2%.
“If water levels continue to fall, growth could also drop to just below 1%,” he said. The extent of the drop in the water level of the Rhine is being monitored at a choke point in Kaub, southwestern Germany, where it reached 48cm on Wednesday against the 1.5 meters needed to carry fully laden ships.
“If you compare this with the past few years, the water levels are exceptionally low,” said Christian Hellbach of the Office for Waterways and Shipping in Duisburg. Some companies have adapted since the 2018 drought. In an emailed statement, BASF said it has implemented an early warning system for low water levels and is also chartering and developing vessels suitable for shallow waters. deep.
German coal importers meanwhile hope river levels will rise soon to allow them to meet demand which, as the war in Ukraine continues, shows no sign of abating. “Before the war it was definitely 1 in 10 ships carrying coal, and since the war we’re definitely at 1 in 5, probably more. So the transportation of coal since the war in Ukraine has jumped one shot,” Claereboets said. ($1 = 0.9793 euros)
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