By Javier Blas
To paraphrase Oscar Wilde, if you miss a critical waterway it can be considered a misfortune, if you lose two it shows carelessness. Of course, we have long since passed the stage of carelessness and are now speeding towards disaster, with three sea routes already lost (the Strait of Hormuz, the Black Sea ports and the Red Sea's Bab el-Madeb) and a fourth waterway ready to be added to the list: the mighty Rhine.
The river, which extends into northwestern Europe, does not have the geopolitical significance of those straits that we have been reading lately in the headlines. However, it is equally vital, as it serves as a transmission line connecting chemical plants, oil refineries, steel mills, coal-fired power plants, and other industrial facilities throughout Switzerland, Germany, and France to Dutch ports. BASF SE, the German chemical giant, describes its significance with some exaggeration: "Without the Rhine, industrial production in Western Europe would collapse."
The river is one of the busiest waterways in the world. Every day, about 6,900 boats carry cargo along the approximately 1,230 km. . The problem he faces is not war or geopolitical upheavals, but the lack of rain: An extreme drought, possibly exacerbated by climate change, has lowered the river's level to dramatically low levels, resulting in barge traffic almost stopping.
The Rhine is constantly facing problems from its low water levels, including crises in 1947, 1959, 1964, 1976 and a historic drought in 2018, which forced many industrial facilities along its banks to close, "shaving" part of Germany's economic growth. If it does not rain soon, the crisis of 2026, as it develops, may be at least as severe as that of 2018. Many fear it could be even worse, given that the driest months for the Rhine – August and September – are still ahead of us.
If the water level drops so much that traffic stops, then the effects will quickly spread inland. Switzerland may be forced to tap into its strategic oil reserves within weeks, as the country will struggle to obtain a sufficient amount of refined products, such as diesel, from the Antwerp-Rotterdam-Amsterdam oil hub, which usually arrive via barges. German petrochemical plants and steel mills may have to reduce their production due to a shortage of raw materials, which are imported from North Sea ports. It is also possible that local fuel shortages will occur in Germany. Due to the increase in prices caused by the war in Iran, many businesses have bought as little fuel as possible in recent months and are operating with the minimum necessary. The traffic disruption on the Rhine comes at the worst possible time.
Commodity traders operating in inland European markets are now monitoring weather and rain forecasts, just as their colleagues in the Middle East are counting drones and missiles. The Rhine's most important "bottleneck" to watch is Kaub, a picturesque town south of Cologne, where the river is flanked by medieval castles. The water level here usually hovers around 200 centimeters at this time of year, while the critical limit is 78 centimeters. Below this level, most barges need to reduce their load to avoid running aground. On Tuesday, the water level dropped to 27 centimeters, the lowest level in recent history so early in the summer.
With no chance of rain, traders predict that the water level in Kaub will fall this week below the 25 cm low recorded in October 2018, reaching a 36-year low.
As in the case of Hormuz or Bab el-Mandeb, there are alternative routes, but their use is neither cheap nor easy. The first line of defence consists of a new barge model, designed for extremely low water conditions, which was developed after the 2018 crisis. At the moment, these boats can still pass through the rocky riverbed into the Strait of Kaub. However, they are causing a huge loss of capacity, as loads have been reduced to keep ships as high on the water as possible: last week, the average payload fell to just 800 tons, from 5,100 tons under normal conditions. If the water level continues to recede as expected, they may not be able to carry enough cargo to be worth the effort by the end of the week.
Because more barges are needed to transport the same amount of cargo, transportation costs have already skyrocketed. Transporting a payload from Rotterdam to destinations south of Kaub now costs almost €150 per tonne, a historic high. Usually, transport costs are around €20 per tonne.
The second option is to transport the cargo by rail. However, this creates another problem: this summer, Germany is renovating a line that runs parallel to the Rhine. The section of the line affected, from Troisdorf to Wiesbaden, includes the Kaub Strait. The reopening of the line is not expected to take place before December.
Although there are other railway lines, they require significant re-routing, which increases costs and time while reducing capacity. Trucks are a last resort: at least 100 trucks are needed to replace a single barge, so they are only used in critical situations.
The industry is already developing crisis response plans. Large industrial companies are based on the banks of the Rhine, including the world's largest chemical plant, which BASF operates in Ludwigshafen, south of the Kaub. On its banks there are also large factories operated by, among others, Daimler AG, Robert Bosch GmbH, Bayer AG and Thyssenkrupp AG.
German authorities estimate that historic Rhine droughts, such as the one that occurred in 2018 and again this year, are now becoming the norm. Instead of every 60 years, they might happen every 10 or 20 years. The war between the US and Iran has reminded the world that waterways are vulnerable to war. The Rhine crisis should remind us that a warmer planet will have the same impact on navigation in our rivers.
BloombergOpinion
