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

The water in the river dropped to “exceptionally low” levels in some areas, disrupting navigation in the country. the most important inland waterwayThis was reported by German officials to CNN on Friday.

The lack of rain in recent months means that cargo ships are now carrying lighter loads, transport costs are skyrocketing, and economic and energy supply risks are worsening.

Last month, the German Federal Institute of Hydrology warned that flows at the Kaub Meter, west of Frankfurt, are already only 45% of the average for this time of year. The agency said it created “frequent obstacles” to ships.

Water levels are now expected to fall further and then rise “very slightly” in the coming weeks, the Rhine Waterways and Navigation Authority said Friday.

The situation is reminiscent of 2018, when similar problems with the river brought “freight traffic to a standstill” and reduced German economic growth by about 0.2%, Deutsche Bank economists say.

Higher costs

While water levels have yet to drop to this extent this year, “cargo ships are already having to cut back on loading volumes,” they wrote in a report last week. “That’s why transportation is getting more expensive.”

For example, in a Kaub gauge, water levels below 75 centimeters (29.5 inches) usually mean a large container ship “should reduce its load by about 30%,” economists say.

“Germany also raises the charge for cargo when the water level falls below a certain level,” insurance analysts at UBS warn.

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

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

But “most of the hard coal needed is transported from the Dutch ports of Amsterdam, Rotterdam and Antwerp on barges” along the Rhine River, putting pressure on local facilities, Deutsche Bank economists say.

According to Henri Patricot, an oil analyst at UBS, the falling water level in the river “makes it difficult to ship energy carriers, which exacerbates the situation with the supply of raw materials in Europe.” The Rhine is also critical for the transportation of chemicals and grain.

A ferry sails along the partially dry riverbed of the Rhine in Bingen, Germany on August 9.
AT report Capital Economics said on Wednesday that while the Rhine problems were “a small problem for German industry compared to the gas crisis,” they could become an even bigger headache this year.

If the drop in water levels “continues until December, it could cut GDP by 0.2% in the second half of the year and add some inflation,” wrote chief European economist Andrew Kenningham.

Germany to launch coal plants as Russia restricts gas supplies

Germany’s hugely important manufacturing sector could be hit harder. Researchers at the Kiel Institute for the World Economy previously found that a country’s industrial production could fall by about 1% during a month of low water.

At present, the German shipping authority does not impose restrictions on traffic on the Rhine due to low water levels.

But a spokesman for the waterways agency said that in some cases, commercial shipping may not be viable if freight cuts have to be cut too far.

Much of Europe is suffering from intense heat and drought. The source of London’s famous River Thames dried up and moved about five miles downstream.

The high temperature of river water in France has made it difficult for some nuclear power plants to operate. And in northern Italy, farmers are facing the worst drought in 70 years that has affected crop production from soybeans to parmesan.

— Julia Horowitz contributed to this report.

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