Forecast rise in Rhine water levels set to bring relief to petchem markets

New York — A projected rise in Rhine water levels this week is likely to ease pressure on European petrochemical market supply chains, impacted by weeks of warm, dry weather.

Water levels at Kaub, a key choke point along the Rhine river, have been falling since the beginning of July, reaching 108 cm on August 3, down from 207 cm a month before, data from the German waterways authority showed.

Petrochemicals market sources said barge capacity upstream has been reduced by around 30-40% in recent weeks.

A petrochemical producer located in the Cologne area said gas barges were yet to be impacted, though this would occur soon if dry weather was to continue.

"We are still ok but if this nice weather continues then in two weeks from now we will have problems with lower rates," the producer said.

However, with rain scheduled over the Alps this week, water levels are expected to rise despite hot, dry weather over much of the water course.

The German waterways authority projected water levels at Kaub would rise above 200 cm by the evening of August 6, before stabilizing around the 200 cm mark.

In the methanol market, logistics have also been affected, with barges unable to fully load.

Sources said inventories in Rotterdam were going to increase over the next days, with an expected slowdown in barge activity.

Higher inventories in Rotterdam usually add downward pressure to European methanol spot prices.

"Europe a bit unpredictable at the moment due to the Rhine situation...if imported material cannot find a destination, the market turns long," one methanol trader said.

However, with water levels expected to rise this week, spot activity is unlikely to be disrupted.

European methanol spot prices have been on the rise since the beginning of July as demand recovers from the lows seen in the second quarter due to pandemic. The FOB Rotterdam price hit a 20-week high on July 31 at Eur186/mt, up 17% since July 1, S&P Global Platts data showed.