London — Transportation costs and logistical difficulties for scrap merchants have increased sharply in recent weeks amid low water levels on the Rhine with little in the way of a recovery expected over the next two weeks.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
While there appeared to be some ease of shipping conditions last week after some rain, the overall situation showed no improvement this week.
"The water is going away again unfortunately and it is causing some logistical issues," one Germany-based merchant told S&P Global Platts.
Due to logistical problems, the higher transportation costs have increased prices for scrap exporters in particular, who use the waterways to deliver scrap material to some of the region's largest ports.
"Freight used to be usually Eur9/mt from the Ruhr [in Germany] to the ports. So that would usually be around Eur15,000 for one barge. Now the same barge is about Eur 40,000-45,000 and this is obviously impacting our costs" a Benelux-based recycler said.
Dry Freight Wire
Do you want to manage price risks and improve profitability on every deal or shape your own analysis, strategic planning and forecasting of the dry freight market? Click the link below and we will send you 5 issues of Dry Freight Wire free to preview.Free Trial
The issue is made worse by the limited volumes that can be loaded onto the barges because of the critically low water levels, further increasing the cost per ton for transportation.
Merchants have increasingly used truck and train transportation as alternatives, but limited availability has also inhibited the trade and increased costs there.
While higher-quality scrap material like E3 and E8 was usually transported by train, it is lower quality material that is largely transported by barge or truck and thus faces the biggest logistical bottlenecks, the Benelux-based merchant said.
Recyclers in continental Europe are expecting little relief in the near term.
In its four-day forecast, the Federal Administration for Waterways and Shipping predicts stable or even lower water levels, well below what is necessary for most ships.
Some sources have said they do not expect water levels to improve significantly until January or February.
"This issue will go beyond scrap, it will affect the whole economy," the Benelux-based recycler said.
--Pascal Dick, email@example.com
--Edited by Jonathan Fox, firstname.lastname@example.org