Low Rhine water levels threaten Germany’s economic growth

A tourist ship sails past the Mouse Tower of Bingen and the partially dried out bed of the Rhine River in Bingen, Germany, August 9, 2022.

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 from the Rhine, the country’s trade artery, causing delays in shipments and causing freight costs to more than quintuple.

Flowing from the Swiss Alps to the North Sea via Germany’s 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 ship carrying iron ore from the port of Rotterdam to German steelmaker Thyssenkrupp’s Duisburg plant, 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 river bed 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 is getting narrower and we are actually starting to travel 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 that 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 stations – now fashionable as an alternative to Russian gas supplies – 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 Rhine’s water level 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 are definitely 1 in 5, probably more. So the transport of coal since the war in Ukraine jumped suddenly,” Claereboets said.

($1 = 0.9793 euros)

A view of a ship that has run dry in port due to low water levels in the Rhine at Lobith
A view of a ship that ran dry in the harbor due to low water levels in the Rhine in Lobith, the Netherlands, August 8, 2022.
A bicycle that has reappeared due to low water levels in a bed of the Rhine in Lobith
A view of a bike that reappeared due to low water levels in a bed of the Rhine in Lobith, the Netherlands, August 8, 2022.

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