October 7, 2022

Low water on Rhine poses new threat to Germany’s economy

3 min read

CNN Business

Germany’s Rhine River is drying up, shortening the supply chain and creating more problems for it. Struggle economy.

Water in the river has fallen to “abnormally low” levels in some areas, disrupting the country’s shipping. The most important inland waterwayGerman officials told CNN on Friday.

Lack of rainfall in recent months means cargo ships are now carrying lighter loads, increasing transport costs, and increasing economic and power supply risks.

Last month, Germany’s Federal Institute of Hydrology warned that water flows at the Kabb gauge west of Frankfurt were already at just 45 percent of average levels for this time of year. The agency said it had caused “repeated disruptions” to ships.

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

According to Deutsche Bank economists, the situation is reminiscent of 2018, when similar problems along the river brought “freight to a standstill” and German economic growth fell by an estimated 0.2 percent.

Although water levels have not yet fallen that far this year, “cargo ships are already having to reduce loading volumes,” he wrote in a report last week. “So, transportation becomes more expensive.”

For example, in the Cobb gauge, a water level below 75 cm (29.5 inches) typically means a large container ship “has to reduce its load by about 30 percent,” experts say. Economics said.

“When the water level falls below a certain level, the levy increases to pay for cargo in Germany,” warned UBS Insurance analysts.

The drought could exacerbate the crisis for Europe’s largest economy, which is already facing the risk of recession due to the energy crisis, high inflation and supply chain disruptions.

Recently, Germany has resorted to it. Fires up its coal power plants. To ensure that the country’s access to electricity is maintained due to Russia’s restrictions on gas supplies.

Economists at Deutsche Bank noted that “most of the coal needed is transported by barges from the Dutch ports of Amsterdam, Rotterdam and Antwerp” along the Rhine.

According to UBS oil analyst Henry Petercott, the river’s falling water levels are “challenging the delivery of energy products, further worsening the commodity supply situation in Europe.” The Rhine is also important for the transportation of chemicals and grain.

A ferry sails along the partially dry riverbank of the Rhine in Bingen, Germany, on August 9.

In a ___ Reports On Wednesday, Capital Economics said that while the Rhine troubles were “a smaller problem for German industry than the gas crisis,” it could become a major headache later this year.

If the drop in water levels “continues through December, it could reduce GDP by 0.2 percent in the second half of the year,” “and increase inflation,” Europe’s chief economist Andrew Cunningham said. wrote

Germany’s vital manufacturing sector could be hit hard. Researchers at the Cal Institute for the World Economy have previously found that in a month of low water, a country’s industrial output can drop by about 1 percent.

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

But a spokeswoman for the waterways agency said that in some cases, commercial shipping may not be viable if freight has to be reduced too much.

Large parts of Europe suffer from extreme heat waves and droughts. The source of London’s famous River Thames has dried up and moved about five miles downstream.

High river water temperatures in France have disrupted the operation of some nuclear power plants. And in northern Italy, farmers are suffering from the worst drought in 70 years. Affects production. of crops from soy to Parmesan.

— Julia Horowitz contributed to this report..

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