The Rhine Falls Toward Its Lowest Recorded Level, Raising Freight Costs Across German Industry

Water levels on the Rhine have fallen far enough to restrict how much cargo barges can carry through Germany's industrial corridor. The reference gauge at Kaub, the shallow point that governs shipments heading toward southern Germany and Switzerland, has dropped to about 25 centimetres, a level last recorded in the drought summer of 2018. Forecasters expect it to fall below 24 centimetres, which Insurance Journal reported would be the lowest since record keeping began in 1880.

Shipping does not stop at those levels. Barges load less, and the cost per tonne rises to cover the lost capacity. The benchmark rate for oil and liquid-bulk barges from Rotterdam to German cities south of Kaub has risen roughly 400 percent in two months, and The Japan Times reported that the surcharges are adding pressure on Berlin to intervene. The chemicals producer Covestro moves more than 30 percent of its finished output and brings in close to 75 percent of its raw materials on the river.

The drought extends beyond Germany. CNBC reported that European authorities are blasting riverbeds on the Rhine and the Danube to deepen channels, a capital response to what has become a recurring seasonal constraint rather than an exceptional event. Iron ore, coal, chemicals and refined petroleum products all move on these waterways, and rail and road capacity cannot absorb the diverted volume at comparable cost.

Germany reported growth of 0.2 percent in the second quarter against the first, following an upwardly revised 0.4 percent expansion in the first quarter. A logistics constraint of this size arrives in an economy that is already expanding slowly.