Companies prepare for the worst because of the Rhine crisis

Tue 16th Aug, 2022

Photo by Lucas Van OortShutdowns, short-time work, supply bottlenecks: German industry warns of devastating consequences for the economy in view of record low water levels on the Rhine of partially zero. "The ongoing dry period and the low water threaten the security of supply for industry," said the deputy chief executive of the Federation of German Industries (BDI), Holger Lösch, on Tuesday. "Companies are preparing for the worst. The already tense economic situation in the companies is getting worse."

In Emmerich near the border with the Netherlands, a level of zero centimeters was measured for the first time on Tuesday, said the spokesman for the Waterways and Shipping Authority, Christian Hellbach. Only on Monday, the previous record low of October 2018 had been undercut here with three centimeters.

However, the water level is not synonymous with the depth of the navigation channel, which is crucial for shipping. This was most recently just under two meters in Emmerich. "Ships can continue to operate," Hellbach said. "But they have to adjust their cargo accordingly." This is confirmed by the DTG shipping cooperative with more than 100 affiliated cargo ships on the Rhine. "We can still sail - on the complete Rhine, Emmerich can also be passed," said DTG authorized signatory Tobias Engels. "However, the cargo ships can currently take less than one-third of their normal loading capacity." In some cases, he said, three times the number of transports are needed to bring the same quantity to the customer.

At least some relief is in sight. "Coming from the Upper Rhine, a small wave is announcing itself, which will cause water levels to rise slightly on the Middle Rhine," the Waterways and Shipping Office said after the recent rainfall, which has also been announced for the rest of the week. "This will also affect the levels on the Lower Rhine in the coming days."

According to the BDI, inland waterway vessels can currently only operate at minimal capacity utilization - "if at all," as BDI expert Lösch said. A switch to rail and road is proving difficult because of bottlenecks on the railways, the Corona pandemic and the shortage of drivers, he said. "It's only a matter of time before plants in the chemical or steel industries are shut down, mineral oils and building materials fail to reach their destinations, or large-volume and heavy transports can no longer be carried out," Lösch said. Supply bottlenecks, production cutbacks or even shutdowns and short-time work would be the result. The low water could further exacerbate the energy supply emergency. Political plans to temporarily rely more on coal in view of the gas crisis would be thwarted by massive transport bottlenecks, the BDI said.

The Rhine is an important shipping route for raw materials such as grain, chemicals, minerals, coal and oil products such as heating oil. The low water, which has persisted for weeks, is already affecting the output of two German coal-fired power plants. Chemical company BASF had said it could not rule out production cuts if the low water disrupted logistics.

According to economists, the problems on the Rhine make a recession even more likely. "We expect the German economy to fall into a mild recession from the third quarter onwards anyway, and growth should only be 1.2 percent in 2022," said Deutsche Bank's chief Germany economist Stefan Schneider, for example. "If water levels continue to fall, growth could also fall just below one percent." Higher transport costs are also likely to increase inflationary pressure.

Photo by Lucas Van Oort


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