The Rhine is shrinking, a threat to Europe’s top economies

Water in the river has dropped to “abnormally low” levels in some areas, disrupting shipping on the country’s main inland waterway, German officials told CNN on Friday.

A lack of rain in recent months means cargo ships are now carrying lighter loads, soaring transport costs and worsening economic and power supply risks.

Last month, Germany’s Federal Institute of Hydrology warned that water flows at the Kaub gauge, west of Frankfurt, were already only 45% of average levels for this time of year. The agency said it created “frequent disruptions” to ships.

Now, water levels are expected to drop further before rising “very slightly” in the coming weeks, the Rhine Waterways and Shipping Authority said on Friday.

According to Deutsche Bank economists, the situation is reminiscent of 2018, when similar problems with the river led to a “freeze of freight” and reduced German economic growth by an estimated 0.2%.

High costs

Although water levels have not yet fallen to the same extent this year, “cargo ships are already having to reduce loading volumes,” they wrote in a report last week. “Therefore, transportation becomes more expensive.”

For example, at the Koub gauge, a water level of less than 75 centimeters (29.5 inches) usually means that a large container ship “must reduce its loading to about 30%,” economists said.

“When the water level drops below a certain level there is a higher tariff in Germany to pay for goods,” warned UBS insurance analysts.

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

Recently, Germany has resorted to firing up its coal-fired power plants to ensure the country maintains access to electricity as Russia restricts gas supplies.

But “much of the coal needed is transported by barges from the Dutch ports of Amsterdam, Rotterdam and Antwerp” along the Rhine, adding to pressure on capacity there, Deutsche Bank economists noted.

According to Henri Patricot, an oil analyst at UBS, the river’s water level is “challenging the transportation of fuel products, which is exacerbating the commodity supply situation in Europe.” The Rhine is also critical for transporting chemicals and grain.

A boat cruises across the partially dry riverbed of the Rhine in Bingen, Germany, on August 9.
In a report on Wednesday, Capital Economics said Rhine’s troubles were “a small problem for German industry compared to the gas crisis” but could become a major headache later this year.

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

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Germany’s key manufacturing sector could take a big hit. Researchers at the Kiel Institute for the World Economy previously found that a country’s industrial output could drop by about 1% in a month of low water.

Currently, the German Shipping Authority is not imposing restrictions on Rhine traffic due to low water levels.

But a spokeswoman for the Waterways Agency said that in some instances, commercial shipping would not be viable if freight traffic had to be significantly reduced.

Large parts of Europe are experiencing severe heat waves and drought. The source of London’s iconic River Thames has dried up and moved approximately five miles downstream.

High river water temperatures in France have disrupted the operation of some nuclear power plants. And in northern Italy, farmers are muddling 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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