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Factbox: Record-low Rhine levels bring widespread disruption across energy and commodities

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Factbox: Record-low Rhine levels bring widespread disruption across energy and commodities

London — Critically low water levels on the River Rhine, the main European shipping artery, are jeopardizing shipments of a wide range of different commodities, such as grains, chemicals and coal, and are affecting operations of both manufacturing and power generating plants along the river, which rely heavily on its waters for transportation and cooling purposes. This is creating acute imbalances between the coastal and inland markets and has already triggered declarations of force majeure on deliveries from some chemical and metals plants.

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Though railcars and trucks are often considered an alternative to barge shipments along the Rhine, possible capacities appear to have been reached.

Rhine water levels at the key chokepoint of Kaub in Germany, dipped to 33 cm Friday, a record low, and with no rain forecast for the next few days the German water Authorities expect the levels to plunge to 23 cm by Monday.

Click here for full-size image

The following are the key facts across sectors and commodities:

SHIPPING

INFRASTRUCTURE

* Double hull barges unable to go in the Upper Rhine region.

* Maximum loading on a barge at Karlsruhe is about 500 mt.

TRADE FLOWS

* Upper Rhine almost no longer navigable.

* Inability to go past Kaub has freed up some tonnage for shipments in the lower Rhine.

PRICES

* Rates for shipping clean oil/petrochemical products from Rotterdam upriver soared to a three-year high, with the Rotterdam-Karlsruhe route now fetching just under $94/mt on 1,000-5,000 mt barges.

* Barge rates on the lower Rhine could ease amid better availability of barges which now can't go past Kaub.

* Rates to barge coal have also increased multifold from usual Eur4-5/mt to Eur35/mt (about $40.20/mt).

PETROCHEMICALS

INFRASTRUCTURE

* BASF has declared a force majeure on 2-ethylhexyl acrylate, butyl acrylate and ethyl acrylate from its site at Ludwigshafen, Germany.

* Other chemical derivatives plants along the Rhine are struggling to source feedstocks, such as propylene or methanol, and this will continue affecting production rates.

TRADE FLOWS

* Where possible, traders have switched to alternative modes of transport, such as railtanks and trucks. Freight costs are rising across the board, pushing up prices for delivered chemical products.

* Stocks in import markets, such as methanol, are piling up in Rotterdam and simultaneously are creating shortages in Germany. In export markets, the converse is true with the Amsterdam-Rotterdam-Antwerp trading hub getting short, while length is building up the river.

PRICES

* Methanol prices in Rotterdam are under pressure, with spot shedding 7.6% over the past week, falling to Eur359/mt FOB Rotterdam Friday.

* Propylene prices are also falling with the spot price on the coast flipping from a premium to a 2% discount to the monthly contract price. It was last traded at a discount in the spring.

COAL AND POWER

INFRASTRUCTURE

* Thermal coal stocks have surged to a four-year high at dry bulk terminals EMO Rotterdam, OBA Amsterdam and OVET Vlissingen. Some 6.1 million mt of stocks were reported at the start of the week, more than 30% up on the year.

* Utilities EnBW and RWE have warned since August about supply issues due to low water levels with potential limitations to 5.8 GW combined capacity. EnBW reissued the warning in the past week amid record low water levels. Upper Rhine has been more heavily hit with EnBW's Karlsruhe power plant "severely affected" from October 16 by reduced coal supply.

* 1.4 GW nuclear plant Philippsburg reduced output by 100 MW due to cooling-related issues amid low water levels until October 29. 1.3 GW nuclear Neckarwestheim 2 plant is on maintenance until November 15 and not affected.

TRADE FLOWS

* A switch to coal railings has been reported by several utilities. Terminal operators said a lot of spare wagons were under maintenance, further reducing capacity.

PRICES

* Power spot prices in Germany are currently about Eur20/MWh above year-to date averages, however, low renewables (wind), fuel, EUA emissions prices are bigger variables according to traders. Stormy weather next week is expected to offset bullish effects from further water level falls.

* Coal barge costs have risen, as noted, from Eur4-5/mt to Eur35/mt and more in the pasty week according to coal traders as the number of vessels needed to shift a normal load triples.

* The build-up in stock levels pressured the front of the CIF ARA thermal coal market toward a contango structure, a European coal analyst said. At the beginning of August the prompt month and prompt month +1 CIF ARA contracts were at a $1.10/mt backwardation, but have since flipped to a 50 cent contango structure this week.

METALS

INFRASTRUCTURE

* Thyssenkrupp declared force majeure on flat steel products Friday afternoon due to suspension of Push-Tow shipping on Rhine.

* Steel production is affected by low water levels in the Duisberg-Ruhrort region.

TRADE FLOWS

* Maximum loadings in the region seen to be 700 mt on barges from 2,00 0mt normally.

* Limited rail or road haulage options.

PRICES

* German steel prices measured via TSI Hot-rolled coil index (ex-works Ruhr) were at Eur561/mt Friday morning -- down from Eur571/mt on September 3; compared with South European HRC ex-works Italy price of Eur517.00/mt -- down from Eur545/mt over same timescale -- showing prices being supported by Rhine issues.

* European steel market meets next week at the biannual Euroblech trade fair in Hanover where many long-term contract prices are discussed.

AGRICULTURE AND BIOFUELS

INFRASTRUCTURE

* All storage for transshipment is fully blocked and this is pushing freight rates higher.

TRADE FLOWS

* Producers are struggling to move rapeseed from inland to ARA for crushing and biodiesel (RME) production.

* Producers are sourcing rapeseed from Black Sea to alleviate pressure

PRICES

* Ethanol is taking on a bearish sentiment as stocks mount on imports and Rhine issues offer little opportunity to move product inland, leaving prices at a five-month low.

* Prompt biodiesel production margins have ballooned, however, the dearth of available feedstock has meant that producers are struggling to actualize these margins.

* RME outright prices in Europe are just shy of a five-year high, with logistical issues and bullish gasoil adding to the upside.

OIL

INFRASTRUCTURE

* Maximum load on barges is 700-1,000 mt of oil products at certain points, but only a maximum of 300 mt-400 mt for most of the Rhine.

* 100% utilization rates are seen for railcars and trucks to transport LPG and oil products such as diesel and heating oil.

TRADE FLOWS

* Difficulties encountered in sending diesel, LPG barges from ARA to inland demand centers in Germany, Switzerland and northeast France.

* Diesel cargo deliveries have increased to ports in Germany such as Hamburg and Rostock, as well as some ports in the Adriatic such as Venice and Koper. Product is then transported on railcars -- and to a lesser extent trucks -- to inland centers.

PRICES

* Pressure builds on cash differentials for barges of 50 ppm gasoil, 0.1% gasoil on limited FOB ARA barges buying.

* Very high prices for end-users amid low stocks inland in Switzerland, Alsace and Germany.

* FOB ARA ULSD barges assessed at a three-month high of $2.75/mt premium over the front-month ICE LSGO future Wednesday

* FCA propane prices for trucks and railcars are oscillating around $80/mt over CIF NWE propane cargoes.

--Staff reports, newsdesk@spglobal.com

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