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By: Frank Knopers
The European economy is not only suffering from high energy prices, but also from extreme drought. The water level in important rivers such as the Rhine and the Danube is now so low that almost no freight traffic is possible. And the expectation is that the water level will drop below the critical level of 40 centimeters in a number of places in the coming days, which means that no more freight traffic is possible. What are the consequences for the economy?
The Netherlands is an important transit country, because goods can easily be transported by ship to the European interior via the ports of Rotterdam and Amsterdam. Although freight transport by sea is slower than by road or rail, it is much cheaper. Especially for the transport of bulk goods and for large quantities of containers. Total freight transport via rivers and canals in Europe accounts for more than 1 tonne of freight per inhabitant of the European Union every year, according to calculations Bloomberg based on Eurostat figures. Measured in euros, inland waterway transport contributes €80 billion to the European economy.
Low water levels currently mean that cargo ships can only carry a fraction of their normal cargo, which means that transport capacity across major rivers is decreasing. Transport by water also becomes less reliable, if cargo ships find it more difficult to pass each other and therefore take longer than usual. This affects important logistics chains, because cargo ships transport semi-finished products and consumer goods in addition to bulk goods. This means higher transport costs, disruptions in logistics chains, and potentially less production capacity for industries that rely on 'Just in time' delivery by water.
The water levels in European rivers have changed throughout history Been low more often, but this time it comes at a very inopportune time. Due to the high price of gas, many European countries are switching back to coal-fired power plants, which often receive a supply of coal by water. Many coal-fired power stations in the Ruhr area, for example, and elsewhere along the Rhine and Danube, are now receiving less coal due to the low water level. That makes it more difficult to scale up production.
There is often no easy alternative to water. For example, there is little space on the German railway network and there is also a major shortage of truck drivers. A cargo ship carrying containers or bulk goods carries as much cargo as dozens of trucks. Scaling up power production by turning old coal-fired power plants back on is therefore not so easy.
The low water level also hinders the supply of fuels and other oil products via water. In France, too, the low water level has an impact on the energy supply. Nuclear power plants use water from the rivers as cooling water, but due to the drought, the supply of water is scarce. To prevent the water in rivers from becoming too hot, nuclear power plants must also reduce their energy production.
The low water levels are also problematic for agriculture. Not only for vineyards along the Rhine and Moselle and the rice fields in the Po Valley, but also for all farmers who are less able to spray their land. The transport of agricultural products such as grain is also hampered by low water levels. Bulk carriers can carry less cargo for export to the world market.
The Rhine is an important transport route connecting industrial areas in Germany and Switzerland with the Rotterdamse port. In the event of persistent drought, this trade route becomes less reliable, resulting in longer delivery times and higher transport costs. If that takes a long time, it can lead to reduced availability and potentially higher prices for certain goods. There may also be a scarcity of oil products in areas that are difficult to supply. If the heat and drought persist for longer, this will also have a detrimental effect on energy prices.
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