Rhine River Low Water Levels Threaten German Manufacturing Recovery, Drought Raises Transport Costs

Low water levels on the Rhine River are disrupting shipments on Germany's most important inland waterway, posing a risk to supply chains and clouding the recovery outlook for Europe's largest economy. According to Jin10, Fabian Spiess, deputy managing director of the German Inland Waterways Association (BDB), said water levels have fallen to the point where vessels must reduce cargo loads, driving up transport costs. This challenges manufacturers that rely on barges to transport coal, crude oil, and chemicals. Citing data from the Kiel Institute for the World Economy, the article noted that prolonged low water on the Rhine in 2018 cost the German economy about 0.4% of output. Deutsche Bank economist Marc Schattenberg said the problem has worsened this year because a major rail freight line along the right bank of the Rhine has been closed for construction, with insufficient alternative rail capacity. Another concern is whether low water levels will further fuel inflation. The European Central Bank is considering whether to further tighten monetary policy; ECB Executive Board member Isabel Schnabel said this month that the Rhine water level is one factor that could keep inflation persistently high.