Low water on the Rhine a new threat to the German economy

River water has dropped to “particularly low” levels in some areas, disrupting shipping across the country most important inland waterwayGerman officials told CNN on Friday.

The lack of rain in recent months means that cargo ships are now carrying lighter loads, transport costs are rising and economic and power supply risks are increasingly severe.

Last month, Germany’s Federal Hydrographic Institute warned that water flow at the Kaub gauge, located west of Frankfurt, was already at just 45 per cent above average for this time of year. The agency said that created a “permanent obstruction” for the ships.

For now, water levels are expected to drop further before rising “very slightly” in the coming weeks, the Rhineway and Maritime Authority said on Friday.

According to Deutsche Bank economists, the situation is reminiscent of 2018, when similar problems with the river resulted in a “cargo standstill” and dampened estimated German economic growth. about 0.2%.

Higher cost

Although water levels have not fallen to the same extent this year, “cargo ships have had to reduce their load,” they wrote in a report last week. “As a result, transportation becomes more expensive.”

In the Kaub gauge, for example, a water level below 75 centimeters (29.5 inches) typically means a large container ship “has to reduce its load by about 30 percent,” the economists said.

Insurance analysts UBS warn: “There is also a tax increase in Germany to pay for goods when the water level drops below a certain level.

The drought could exacerbate an even bigger crisis for Europe’s largest economy, which is already facing recession because of the energy crisis, high inflation and supply chain bottlenecks. response.

High temperatures are threatening a European economy that is on the brink
Recently, Germany has used burning coal power plants to ensure that the country still has access to electricity due to Russia’s limited gas supplies.

But “much of the required hard coal is shipped from the Dutch ports of Amsterdam, Rotterdam and Antwerp by barge” along the Rhine, adding pressure to capacity there, Deutsche Bank economists note .

According to Henri Patricot, an oil analyst at UBS, falling river levels “are challenging shipments of energy products, which are exacerbating the commodity supply situation in Europe.” The Rhine is also important for transporting chemicals and grain.

A ferry traverses the partially dried Rhine riverbed in Bingen, Germany on August 9.
In one report On Wednesday, Capital Economics said that while the Rhine troubles are “a minor problem for German industry compared to the gas crisis,” it could become a bigger problem later this year. .

If the water level decline “continues through December, it could subtract 0.2% of GDP” in the second half of the year, writes Andrew Kenningham, chief economist for Europe.

Germany burns coal stations as Russia squeezes gas supplies

Germany’s hugely important manufacturing sector could be more affected. Researchers at the Kiel Institute for the World Economy previously found that in a month of little water, the country’s industrial output could fall by about 1%.

Currently, the German maritime authority does not impose restrictions on traffic on the Rhine due to low water levels.

However, a spokesman for the waterways agency said that in some cases, commercial shipping may not be possible if rates have to be reduced too significantly.

Much of Europe has suffered from extreme heat waves and droughts. The source of London’s iconic Thames has dried up and moved about 5 miles downstream.

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

– Julia Horowitz contributed to this report.

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