London — Some German petrochemicals plants are already curtailing production because water levels on the Rhine are expected to remain at record-lows, according to market sources.
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Water levels at the key chokepoint of Kaub in Germany fell to a fresh record-low of 24 centimeters at midday Monday, according to the German waterways authority WSV. It expects water levels will hover between 27 and 33 cm at least until Friday, despite a forecast of rain this week.
"We are reacting to the increasing logistical issues by adjusting the production load. The situation is re-valuated on a daily basis,"a spokesman for German-based petrochemical company Covestro said. He added, however, that there were no "significant productions limitations due to the low Rhine level" at the moment.
Covestro owns production facilities in Dormagen, Krefeld-Uerdingen and Leverkusen Shell in nearby Wesseling said it was regularly reviewing "whether or not production levels have to be adjusted" as a result of the logistical issues.
"We can confirm that barges no are longer entering Wesseling harbor due to low water levels. Shell is mobilizing and we are usung alternative supply routes and options," the company's spokesman said.
Further up the Rhine BASF has declared a force-majeure on acrylates from Ludwigshafen, Germany, saying that the site was "encountering significant constraints regarding the raw material supply via barge due to the very low water level of the River Rhine".
"At the current water level -- a record low -- the Ludwigshafen site can only be reached by a few ships and we have to successively adjust production," the company's spokesman said.
IMPACT ON SPOT MARKETS
Methanol, styrene and propylene derivative plants, in particular, appear to be struggling to source feedstock and some have reduced operating rates, market sources said. Inability to ship these feedstocks up the river to customers means that stocks are piling up in Rotterdam and spot prices in coastal locations continue to be under pressure.
Spot methanol prices fell 8.2% on the week to Eur355/mt FOB Rotterdam, a two-month low, Monday.
Propylene spot prices also slid to the lowest since May to Eur1,049.50/mt CIF NWE Monday. The coastal spot parcels are now trading at an around 2% discount to the monthly contract price compared with a premium throughout the summer.
Styrene spot prices fell 4% over the week to $1,225/mt FOB ARA, an 11-month low.
Import markets tend to have greater oversupply in the ARA region during logistical issues on the Rhine, as traders struggle to barge product up the river to customers in Germany. Export markets, on the other hand, might become tight as supplies from inland Europe to the ARA region are delayed.
"[The Rhine] would need weeks of rain for logistics to run at normal," said an MTBE market source.
Barge transport has been restricted for over three months since water levels began dropping.
"There are some barges that still can go upstream, it depends on the construction and on the kind of risk the operator is willing to take," a barge operator said, adding that only 50% of a barge capacity could be loaded to Karlsruhe and up.
The capacity of alternative transport options appears to have been reached, especially against the background of the truck driver shortage in Germany.
"Rail cars and trucks are the main alternatives, but [I'm] not sure how great availability is over there either," an aromatics trader said.
German rail operator Deutsche Bahn did not immediately respond to a request for comment.
--Edited by Jonathan Dart, firstname.lastname@example.org