Low water on the Rhine is a new threat to Germany’s economy

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Water in the river has dropped to “exceptionally low” levels in some areas, disrupting navigation on land main inland waterwayGerman officials told CNN on Friday.

A lack of rainfall in recent months means that cargo ships are now carrying lighter loads, soaring transport costs and exacerbating economic and electricity risks.

Last month, the Federal Institute for Hydrology warned that the water flow at the Kaub gauge west of Frankfurt was already only 45% of the average level for this time of year. The agency said this created “common obstacles” for ships.

The water levels are now expected to drop even further before rising “very slightly” in the coming weeks, the Rhine Waterways and Shipping Office announced on Friday.

The situation is reminiscent of 2018, when similar problems with the river led to a “stalemate in cargo shipping” and reduced German economic growth by an estimated 0.2%, according to economists at Deutsche Bank.

Higher cost

Although water levels have not dropped as much this year, “cargo ships are already having to reduce loads,” they wrote in a report last week. “Therefore, the transport becomes more expensive.”

At the Kaub gauge, for example, a water level below 75 centimeters normally means that a large container ship “has to reduce its load to around 30 percent,” according to the economists.

“In addition, there is an increased charge for freight in Germany when the water level falls below a certain level,” warn the insurance analysts at UBS.

The drought could exacerbate an even bigger crisis for Europe’s largest economy, which is already at risk of recession due to an energy crisis, high inflation and supply chain shortages.

Recently, Germany has resorted to ramping up its coal-fired power plants to ensure the country retains access to electricity while Russia cuts gas supplies.

But “a large part of the required hard coal is transported from the Dutch ports of Amsterdam, Rotterdam and Antwerp by barge” along the Rhine, which increases the pressure on capacity there, economists at Deutsche Bank noted.

According to Henri Patricot, an oil analyst at UBS, the river’s declining water level “poses a challenge for the transport of energy products, which aggravates the raw material supply situation in Europe”. The Rhine is also important for transporting chemicals and grain.

A ferry cruises past the partially dried-up river bed of the Rhine River in Bingen, Germany, August 9.
in one report Capital Economics said on Wednesday that while the problems on the Rhine were “a small problem for German industry compared to the gas crisis,” they could become a bigger headache later this year.

If the fall in water levels “continues into December, it could cut 0.2% of GDP in the second half” “and add a touch to inflation,” wrote Europe’s chief economist Andrew Kenningham.

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Germany’s immensely important manufacturing sector could be more affected. Researchers at the Kiel Institute for the World Economy have already determined that in a month with low water, the country’s industrial production can drop by around 1 percent.

The German shipping authority currently does not provide for any restrictions on Rhine traffic due to low water.

However, a spokesman for the Waterways Authority said that in some cases commercial shipping may not be profitable if freight has to be reduced too much.

Large parts of Europe are suffering from extreme heat waves and droughts. The source of London’s legendary Thames has dried up and has moved some five miles downstream.

High river water temperatures in France have hampered the operation of some nuclear power plants. And in northern Italy, farmers are struggling through the worst drought in 70 years, affecting production of crops from soy to parmesan.

— Julia Horowitz contributed to this report.

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