Water levels on Rhine rise, but relief forecast to be short-lived

Water levels on the Rhine, a critical European inland waterway for freight, rose above 50 centimeters Oct. 26 and are forecast to hover around 70 cm in the next few days, but the rebound in flows is expected to provide only short-term relief to fuel supply chains across the region, according to market participants.

Water levels at Kaub, the shallowest part of the Middle Rhine, stood at 56 cm as of late afternoon Oct. 26 and are forecast to exceed 70 cm by the end of the day, then expected to hold around that level for the following three days, according to data from the German water authority WSV.

The Rhine water levels exceeded 50 cm on Oct. 26 for the first time since Sept. 4, with levels mostly below 10 cm from Sept. 24 to Oct. 10 and mostly below 20 cm from Oct. 11 to Oct. 22.

The recent rise in Rhine water levels has generated renewed market activity, but the improvement is expected to be short-lived, according to a European-based market participant who asked for anonymity because the participant was not authorized to speak publicly. The source said extremely low water levels in recent weeks had forced refiners to rely more heavily on trucks, rail, pipelines, and some coaster movements to transport products, although overall product movements remained slow.

A second market participant similarly said the latest rise is unlikely to provide meaningful relief, as the window for barges to pass the Maxau area is expected to be too short to materially ease logistical constraints. Conditions are particularly tight in Switzerland, according to the source, where product inventories are extremely low and market participants are focused on maintaining supplies to retail stations.

The Swiss government authorized the release of diesel inventories Oct. 23 to address shortages connected to pipeline delivery delays due to heavy rainfall in southern France. Switzerland also approved the release of jet fuel stocks earlier this month.

"Switzerland's logistical supply has been severely affected for months by the persistent low water levels on the Rhine. If a problem arises with one of the other modes of transport, this can quickly lead to a bottleneck," the Swiss Federal Office for National Economic Supply said.

Germany is comparatively less affected, according to the market participant, because of its larger refining base and less severe isolation from Rhine supply routes, although low water levels continue to restrict river transportation.

That said, rail options in Germany remain limited due to the ongoing closure for refurbishment of the right-bank Middle Rhine Line, a key German freight route. The line is expected to stay closed until Dec. 12.

"The situation for refiners along the Rhine remains broadly unchanged in October, with the month-to-date average water level at Kaub at around 14 cm. Crude supply remains relatively stable, but the main logistical challenge is clearing refined products amid higher freight costs due to highly limited options," said Sammir Lesage, analyst at S&P Global Energy CERA.

"Those additional costs are likely to be passed through the supply chain, with consumers ultimately bearing much of the burden", Lesage added.

Platts, part of S&P Global Energy, assessed the ULSD 10 ppm Northwest European Cargo flat price at $1,524.75 mt Oct. 23, while the ULSD 10 ppm Mediterranean Cargo flat price was assessed at $1,518.50 mt. For context, ULSD 10 ppm NWE Cargo September average was $1,503.63 mt and August average was $1,290.63 mt, while the ULSD 10 ppm MED Cargo September average was $1,512.43 and August average was $1,322.56.

Freight costs from Amsterdam-Rotterdam-Antwerp hub to Basel, Switzerland, were at €255/mt ($285.27/mt), where they have held since Oct.8, Spotbarge data showed.