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Record low Rhine water levels continue to impact commodities

Highlights

Tuesday levels at Kaub to recover by 10 cm

Hard coal plants en route reduce output

Petrochemical plants adjust production

London — Commodity transports are still negatively affected by Rhine levels on a week-long record low, though more rainfall this weekend means a silver lining bringing slow recovery to water levels Tuesday, data provided by WSV and The German Federal Institute of Hydrology (BfG) showed Friday.

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Currently pegged at 30 cm at the Kaub chokepoint, the Rhine is set to reach 41 cm Tuesday, according to the lastest forecast. With premium transport payments typically applying from about 140-150 cm at Kaub a quick elimination of transport issues is not in sight though. BfG said Thursday that the few days of rain forecast wouldn't be enough to bring sustainable relief to the low water situation on the Rhine

Rhine river levels 2010-2018: key choke point Kaub

GERMAN SPOT PRICES REMAIN FIRM

"There are issues with the coal transport and the impact on power prices is bullish. There is rain forecast in the Alps [which is to help to recover water levels]," a trader said Friday. German spot power prices are currently firm traders said with wind and more lignite availability to ease some of the bullishness caused by low water levels.

On Friday EnBW also announced a planned outage for 842 MW RDK 8 hard coal plant in Karlsruhe from October 27 to November 1, with its 778 MW Heilbronn coal plant out from November 3 for a week as well. A number of other hard coal plants have seen production cuts in the past week, although on a national level coal burn remained strong, EEX Transparency and Fraunhofer data showed.

Utilities RWE and EnBW have been warning since August that low Rhine levels were hitting supply to some of their hard coal-fired plants, with EnBW reissuing warnings Tuesday because of steep falls this week.

SELECTED HARD COAL PLANT OUTAGE (EEX TRANSPARENCY)

From To Location Utility Plant Name Limitation Outage type
03.11.2018 10.11.2018 Neckar EnBW Heizkraftwerk Heilbronn Block 7 778 MW Maintenance
27.10.2018 01.11.2018 Rhine EnBW RDK 8 842 MW Maintenance
25.10.2018 26.10.2018 Rhine GKM GKM AG TNG 441 MW Unscheduled
25.10.2018 26.10.2018 Rhine GKM GKM AG Amprion 294 MW Unscheduled
21.10.2018 30.10.2018 Lippe RWE Westfalen E 780 MW Planned

BARGE OPERATOR SAYS 'AT LEAST 50 CM' DEPTH NEEDED

The delivered-Europe CIF ARA thermal coal price had been resilient to the Rhine situation so far, with only a slight contango emerging between the front months, but sources were weary that a sustained logistical bottlenecks on the Rhine would eventually drag prices down from current high levels.

Despite the slight recovery expected in water levels, a coal barge operator said at least 50 cm would be required as it would allow barges to reach the upper Rhine, but a level of 250 cm would be required in the long term. Currently, coal barges were unable to travel further than Cologne, sources said.

Freight rates for coal barges were heard to have increased greatly as water levels receded. Rates were heard to have risen to Eur25-Eur35/mt, from a usual level of Eur4-7/mt, and barge sources expected rates to remain at similarly high levels through to the end of the year.

A European barge broker said the situation was "killing business" as utilities were either railing coal or keeping it in stockpiles.

FORCE MAJEURE ON PETROCHEMICAL PRODUCTS

Operations at a number of petrochemical plants remain curtailed as they struggle to source raw materials and push out their produce to customers.

In addition to the force majeures on a number of products out of BASF's Ludwigshafen site, companies like Covestro, OXEA and Shell are also monitoring production levels at the German plants on a daily basis.

European steam crackers were also mulling a possibility of trimming run rates amid inability to source sufficient naphtha and LPG.

Separately, as onshore storage tanks were filling in, some sources said that they stored liquid chemicals on barges on the water.

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Record low Rhine levels impact commodity deliveries

--Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com

--Inga Freund, inga.freund@spglobal.com

--Joseph Clarke, joseph.clarke@spglobal.com

--Maria Tsay, maria.tsay@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com