Market Matters Blog 08/15 10:51
Shrinking Rhine River Devastating to German Agriculture, Energy Sectors
Germany's most important waterway is drying up, creating serious concerns
that commerce on the river will be stopped.
DTN Basis Analyst
The low water level of Germany's Rhine River is causing problems for inland
shipping, agriculture and coal-fired power plants. The lack of freight capacity
on the Rhine affects the entire economy, as many other goods cannot be
transported or delivered.
The Rhine River, which runs northwest from Switzerland through Germany,
France, and the Netherlands into the North Sea, is a major petroleum product
transportation corridor. The navigable portions of the river connect the major
refinery and petroleum trading centers of Amsterdam and Rotterdam in the
Netherlands and Antwerp in Belgium, collectively known as the ARA, to inland
markets, according to the U.S. Energy Information Administration (EIA).
Approximately 400,000 barrels per day (bpd) of oil products are transported on
"Alternatives to shipping products on the Rhine River are costly. Europe's
petroleum product pipeline infrastructure is not as extensive as in the United
States, leaving relatively more expensive transport options such as rail and
long-distance trucking as the only alternatives," said the EIA.
According to Germany's Federal Waterways and Shipping Administration (WSV)
water levels at Kaub, west of Frankfurt, are predicted to drop to 30
centimeters (11.8 inches) in the coming week. At that level, the river becomes
virtually impassable for many barges/ships, and traffic may be stopped
altogether. The Kaub gauge is the most important water level measurement
station in the Middle Rhine, according to Deutsche Welle (DW), Germany's
Inland shipping must pass through this choke point to get to the Upper Rhine
and access southwestern Germany's industrial centers, like Mannheim, in the
German state of Baden-Wurttemberg.
Similar to what happens on the Mississippi River when water levels fall
close to zero-gauge, barge/ship drafts are being reduced. That means moving
less product at a higher cost. HGK Shipping, Europe's largest inland shipping
company, said in a post on their LinkedIn page, "The freight has to be
distributed to more and more ships and the freight cost increases. Half freight
means a second ship and with that the freight costs automatically doubled."
"In addition, even if the water levels are not yet as low as in the hot
summer of 2018, when historic lows were reached, diesel prices are
significantly higher today than they were then," said Martina Becker, who is
responsible for heavy shipping at the HGK Group.
The current level noted above hasn't yet fallen below the lowest figure ever
recorded on the Rhine, which was in October of 2018. That measurement then was
25 cm and was taken from the same reference point in the river.
I was in Germany in October 2018 and traveled to the city of Bingen am
Rhein, in Mainz-Bingen district in Rhineland-Palatinate, southwestern Germany.
Bingen is a port at the confluence of the Rhine and Nahe rivers. I saw barges
moving in the middle of the river, but drought was clearly visible along the
dried-up shoreline, as you can see in the photo accompanying this article. The
ferry was still running, but eventually about half of Germany's river ferries
stopped running in fall 2018, according to the Federal Waterways and Shipping
Administration. Sandbars never seen before emerged in many places, and in some
spots, undetonated bombs and grenades that had been submerged since World War
Dubbed the great drought of 2018, it ended up being a disaster across
Germany not just for much of the river shipping industry, but also for most
farmers. With virtually no rain and record-high temperatures since April that
year, grain and oilseed harvests were 50% to 70% less than normal, and in other
places, nothing was harvested at all.
Now, in 2022, drought has once again struck farmers not just in Germany but
in much of the E.U. "From France to Germany and Hungary to Romania, a broad
range of crops have been withering through the summer's heat waves, threatening
to drive food prices in the European Union higher and reduce supplies from the
world's largest exporter of agricultural and food products," said Gro
Intelligence. "The lowest soil moisture levels in at least a decade are
weighing on sugar beets and potatoes -- with France, Germany, and Poland
accounting for most of these crops. And in Romania, the EU's biggest producer
of sunflowers, 'moderate' drought levels point to a weaker harvest that may
increase demand for EU vegetable oil imports."
The head of Germany's largest farmers group said dry and hot conditions will
likely mean heavily reduced harvests in some regions. "Crop yields in some
German regions are likely to be significantly lower than expected," the
president of the German Farmers Association (DBV), Joachim Rukwied, said on
July 29. "Overall, the harvest nationwide is expected to be lower, with
Germany's hot summer and lack of rain having left huge swaths of arable land
Meanwhile, if the Rhine River becomes impassable, anything moving by
barge/ship, including agriculture and key energy products, will be left
homeless, paralyzing the already stressed economy in Germany.
Mary Kennedy can be reached at Mary.Kennedy@dtn.com
Follow her on Twitter @MaryCKenn
(c) Copyright 2022 DTN, LLC. All rights reserved.
Get your local Cash Bids emailed to you each morning from DTN – click here
to sign up for DTN Snapshot.