Low Rhine water levels drive up petrochemicals logistics costs

LONDON (ICIS)–Water levels on the River Rhine, a key petrochemicals waterway in Europe, are extraordinarily low after a dry November and barges are unable to fully load, increasing transport costs, the Rhine Shipping Authority (WSA) said on Wednesday.

Petrochemicals players in Europe are also starting to feel the pinch; in the key styrene market – feedstock for many downstream products – deals normally signed for 1,000-tonne parcels are being concluded at 700 tonnes, sources told ICIS this week.

Some sources even said their trades would go ahead “if water level permits”.

This is in line with information from the WSA; its spokesperson Florian Krekel told ICIS on Wednesday the November’s rain precipitation had been almost non-existent, causing water levels to stand at low levels going into December.

“The last peak of water levels dates to the end of October. From then on, water levels dropped about 1.30 m at the Kaub gauging station,” said Krekel.

Kaub (see bottom map) is where the Rhine’s shallowest point is located; it is used for measurement of water levels as it is the location where barges first find difficulties to navigate fully loaded if levels are low.

Krekel continued: “So, even mid-sized ships are obliged to reduce their load since at least three weeks ago.

“Within the coming days, some moderate rise of water levels is expected. But without significant precipitation the general situation will not change.”

One source pointed to potential higher rail rates as transports of material moves away from the Rhine.

While rain precipitations could become more recurrent going into the winter months, they could also turn into snow precipitations if the winter is very cold.

That, in turn, would not help the Rhine’s water levels, which would only start to considerably increase from March onwards, where the snow in the Alps starts to melt.

NO SIGN OF NEW BARGE GENERATION
After the extraordinary dry 2018, when companies took a hit in the hundreds of million euros due to higher logistical costs, some of them said they were mulling to bring into the market newer, flatter barges which could continue operating even at very low water levels.

The river acts as a true ‘motorway’ for petrochemicals in northwest Europe; barges navigating the Rhine carry key feedstocks and end products for many producers situated close by, including industrial heartlands in Germany and the logistics hubs of the Netherlands, where the river flows into the North Sea.

Germany’s chemicals major BASF said at the time it was considering strategies to deal with droughts after reporting a €200m hit to earnings due to higher logistical costs.

Evonik reported a €35m hit.

While a severe drought like that of 2018 could occur once-in-a-century, climate change and warmer, drier summers could cause droughts as often as every decade, some experts said at the time.

For the moment, however, the new generation of barges does not seem to be navigating the Rhine’s waters.

“To my eyes, the logistics on the Rhine have not changed since 2018. Types and sizes of ships are still the same. New barges with higher capacity at low water levels are not yet in service,” concluded WSA’s Krekel.

Source: German Federal Institute of Hydrology (BfG)
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Source: ICIS
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Front page picture: The Rhine’s Kaub gauge station during the peak of 2018’s drought
Source: Michael Probst/AP/REX/Shutterstock

Additional reporting by Fergus Jensen and Helena Strathearn