Crisis on the Rhine

An economic slowdown in Germany is now more likely than ever as fresh troubles on the Rhine River pose a headache for shipping and heavy industry. Levels at Kaub, a key point on the waterway west of Frankfurt, are poised to breach 40 centimeters (15.75 inches) on Friday, and will continue to dwindle in navigability in the coming days. Below that marker, it’s not economical for many barges to transit the river, which is used to ship everything from oil & gas and coal to chemicals and grain.

Weeks of dry weather have weighed on Europe’s major waterway, with shallow depths preventing barges from loading their full volumes. The effects could ripple through the continent for months, just as the region is on the brink of recession from the war in Ukraine and untamed inflation. Economists estimate the Rhine disruption could knock half a percentage point off Germany’s growth this year, adding to the significant price pressures seen across many Western European countries.

“We’re expecting this situation to continue towards the end of the year,” noted Toril Bosoni, head of the IEA’s oil market division, adding that conditions could be more precarious for landlocked countries in central and eastern Europe that normally get energy deliveries via the Rhine.

Chemical maker BASF (OTCQX:BASFY) hasn’t ruled out production cuts as it placed orders for shallow-water barges and uses more rail to transport goods. Utility Uniper (OTC:UNPPY) warned that it cannot bring enough coal by train to run its plants at full capacity for an extended period of time, threatening output at Germany’s coal-fired power stations. Crisis teams at Thyssenkrupp (OTCPK:TKAMY) are also meeting daily as the steelmaker uses ships with lower drafts to keep up supplies.