Record-low water levels on the Rhine and Danube threaten supply chains, with estimates pointing to losses of up to two billion euros in added value in this quarter alone.
The water level of the Rhine near the German town of Kaub has dropped to just 24 centimeters, the lowest level since measurements began back in 1880. Forecasts are even more grim, suggesting it could fall to as low as 17 centimeters by Saturday. This dramatic situation on one of Europe's most important transport arteries threatens serious disruptions to the German and, by extension, the European economy.
Economic experts are already tallying up initial damage estimates. Stefan Kooths, director of the business cycle and growth research group at the Kiel Institute for the World Economy, stated that low water levels could shave 0.1 to 0.2 percent off Germany's GDP in the third quarter alone. That translates to a loss of between one and two billion euros in added value.
Thilo Schäfer, an economist at the German Economic Institute, warns of the possibility of completely stifling the already weak economic growth. "If shipping on the Rhine remains impossible for an extended period, it could completely snuff out the tiny bit of economic growth we have," Schäfer said.
Due to prolonged heat and lack of rainfall, cargo ships across Germany can only carry a fraction of their usual load, and on some stretches, navigation has been completely halted. In Cologne, river traffic has already been stopped, and record-low water levels have also been measured in Duisburg. Düsseldorf has reached levels seen in the record-dry year of 2018.
Torsten Schmidt, head of the business cycle department at the Leibniz Institute for Economic Research, explains that key industries are the hardest hit. "Experience from 2018 shows that low water levels can significantly hamper production. The steel and chemical industries, which depend on raw materials delivered by water, are particularly affected," Schmidt said. According to available information, industrial company ThyssenKrupp has already reduced production.
The situation is further complicated by the fact that river transport cannot simply be shifted to roads or railways. Simon Gerards Iglesias from the German Economic Institute outlined the scale of the problem: "To replace just the transport of gasoline and diesel currently moving by ship on the Rhine, you would need about 3,000 tanker trucks a day."
Such a solution is not feasible due to a chronic shortage of trucks, drivers, and deteriorating road infrastructure. "There simply is no alternative," Iglesias said.
The consequences of supply chain disruptions could soon be felt by consumers. More expensive transport of fuel and raw materials increases production costs, which could spill over into prices at the pump and further fuel inflation. "What starts on the Rhine could eventually become visible at gas stations," Iglesias warned.
Inflation in Germany already rose to 2.8 percent in July, according to preliminary data from the federal statistics office. Further price increases would reduce consumers' purchasing power and domestic consumption, which is one of the mainstays of the German economy.
Germany faced a similar crisis in 2018. At that time, the Weser and Elbe rivers were below the required water level for normal navigation for 80 and 90 percent of the days between June and December, respectively. In August of that year alone, the volume of goods transported on inland waterways fell by 21 percent.
Estimates at the time showed that low water levels reduced Germany's economic growth by 0.4 to 0.5 percentage points. During that crisis, exports by river fell by nearly 20 percent, and imports by 12 percent. Many companies subsequently permanently shifted their transport to road and rail, showing that temporary climate shocks can have long-lasting effects on supply chains.
Given the severity of the situation, German Transport Minister Steffen Bilger has called a expert conference in Bonn for Thursday to discuss possible emergency measures. However, the room for quick action is quite limited. As water levels continue to fall and meteorologists forecast no significant rainfall, key industries are left without their vital transport routes.
A particular problem is that the record-low water level has appeared unusually early in the season. Alongside the Rhine, other major rivers, including the Danube, are also facing historically low water levels, further hampering river transport and increasing costs across Europe.
