Falling Rhine water levels threaten German economy

The record-low levels are also taking a toll on the wider economy, as Germany faces serious shipping difficulties on the vital Rhine River because of the extreme heat and drought.

According to forecasts published by Germany's Federal Waterways and Shipping Administration (GDWS), the water level at the strategically important Kaub gauge is expected to fall to 18 centimeters (7 inches) on Friday, Aug. 7. The level is forecast to drop to 19 centimeters on Thursday, surpassing the previous record low.

According to reports in the German media, low water levels are limiting the loading capacity of cargo vessels in several sections of the Rhine. Shipping companies are imposing surcharges on top of normal freight rates to compensate for their reduced capacity.

Along with higher freight rates, the need to divide cargo intended for a single vessel among several ships is further increasing logistics costs for wholesale customers.

The situation is prompting wholesalers to reduce purchases to avoid additional expenses, leading to supply problems.

Drought poses risks to raw material transportation

The drought affecting the Rhine, a major artery for transporting critical raw materials such as grain, minerals, ores, coal and petroleum products, directly threatens German industry.

Analysts said low water levels on the Rhine and several other rivers were already severely disrupting freight transportation, noting that river vessels can operate with only a fraction of their normal capacity during droughts.

They said this was causing market bottlenecks, increasing transportation costs and extending delivery times.

Supply chains in key sectors such as chemicals, steel and petroleum are being adversely affected, with potentially severe consequences for the entire German economy, they added.

Economists warned that a prolonged drought would place an additional burden on the German economy, which is already going through a difficult period.

They also said water levels remaining low for an extended period could negatively affect Germany's economic performance in the third quarter.

According to the Kiel Institute for the World Economy (IfW), the macroeconomic effects of the logistics disruptions could reduce gross domestic product by between 0.1% and 0.2% in the third quarter.

Located near the Loreley in the state of Rhineland-Palatinate, the Kaub passage is critically important for inland shipping. The water level there must be at least 1.5 meters (4.9 feet) for cargo vessels to operate at full capacity.

Call for national task force

North Rhine-Westphalia Transport Minister Oliver Krischer called for the establishment of a national task force to rapidly coordinate concrete measures in response to the Rhine's low water levels.

Krischer said urgent discussions were needed on measures including creating additional storage capacity for hazardous materials at ports, expanding rail capacity and determining which cargoes should be prioritized for transportation.

Recalling that a similar approach proved successful during the 2018 drought, Krischer said experts from the logistics industry, local authorities, state governments and the federal government should be brought together.

Warning that the current situation was more dangerous than in previous years, Krischer said: "In 2018, we did not experience the drought until late summer and autumn. This time, however, we are confronting it in the middle of summer. We will probably have to contend with this problem for weeks and months."