Rhine levels fall, growth risks rise

Companies have so far managed it well, with measures to mitigate the impact bearing fruit.

Here's Bayer BAYGn.DE from today's earnings call (via AlphaSense): "I think we've managed to mitigate it thus far," said Bill Anderson, CEO of Bayer. "So far there's not been an impact."

And from BASF's BASFn.DE call last week (via AlphaSense): "We are much better prepared than we were, for example, in 2018, where we had a big impact of low Rhine water levels over an extended period of time," said BASF chairman Markus Kamieth.

"By deploying specialised ships that can still carry goods – feedstocks and products – through the Rhine at very, very low water levels, and also due to various other contingency measures of shifting the mode of transport, we are in a very, very good shape right now," he added.

Water levels on the Rhine, a core artery for German manufacturing and energy transportation, are causing another headache.

On Tuesday, the water level at the Kaub chokepoint, a shallow section of the river, hit its lowest since records began in 1880.

Roughly 285 million tons of freight move along the river annually, according to ING, carrying about 80% of all goods transported on Germany's inland waterways.

"As the Rhine is home to crucial industries, the economic impact of supply chain constraints, and a potential reduction in production is much larger than the Rhine's c.6% share of total German freight volume would suggest," notes ING's global head of macro Carsten Brzeski.

During the 2018 drought, a full month of low water reduced inland shipping volumes by about a quarter, Brzeski adds, noting that it was estimated to have shaved about 0.3 percentage points off GDP growth.