EU metal-shipping crisis worsens after Rhine River water levels plummet

An alarming drop in water levels in Germany’s Rhine River and other key waterways in Europe has led to massively strained logistics in shipping commodities across Europe, driving up costs and exacerbating material supply, sources told Fastmarkets.
The Rhine is one of Europe’s largest rivers, stretching from Switzerland in the south up to the Netherlands in the north. It is a vital artery for the shipment of metal across western Europe.

Dramatic disruption to trade
Record-breaking heat in Europe and a stark lack of rainfall on the continent this summer has led to water in the Rhine sinking to a level that is impeding shipping activities.

A Rhine water-level marker west of Frankfurt was forecast to drop to 40cm early on August 12, according to the German Federal Waterways and Shipping Administration, as reported by Bloomberg on Wednesday August 10.

“River water levels are extremely low, so river transport is hampered and is slowing down [steel] deliveries. Some of this also affects raw materials deliveries, such as iron ore and coal transported by river barges,” a trading source in Germany said.

“We have to load barges less than 50% [capacity] to make it work. But I’m afraid in the upcoming day, the water levels [in the Rhine] will fall more, making river transport impossible,” a trading source in the Benelux region told Fastmarkets.

Steel scrap flows drop
Much like the Rhine’s water levels, inflows to some German scrapyards have been drying up of late due to greater difficulty in shipping, sources said.

“A shortage of scrap in Europe is becoming very real. Rivers have dried up and there is no barge movement – they could even close the [Rhine] river next week,” a major steel scrap exporter said on Thursday August 11.

“There is very little scrap inflow to German yards now, some yards are usually receiving material by barge. Scrap sellers are scared to offer material for shipment in the first half of September,” he added.

In Germany, barges are more commonly used for transporting scrap from the yard to the steel mill, a German scrap industry source said.

Because of the low water level, barges are only able to take around one third of their usual cargo, which means three barges are required for every one that would ordinarily be used, thus raising freight costs sharply, the source said.

If using the Rhine becomes impossible and freight must be transferred to the road, around 80 truckloads of scrap would be needed to replace a barge, they added.

A major Bangladeshi steelmaker source said on Thursday he was fearful of the short-term future of scrap availability from Europe.

“There is some shakiness in the scrap markets and low river levels in Europe and the UK mean that they are [potentially] not going to be able to supply scrap,” he said.

Furthermore, in an environment of increasingly tight transport availability, scrap suppliers have had to compete with coal suppliers to get space on barges in Germany, Fastmarkets heard.

Russia has recently reduced gas supply to Europe dramatically, so the German power industry has increased its reliance on coal.

“Since July, Russia supplied only 20% of normal gas supply through Nord Stream 1, so Germany has to reactivate mothballed coal-fired power plants,” a Germany-based distributor told Fastmarkets.

Prices for steel scrap to bellwether import market Turkey have already risen in the week-to-date amid higher local steel demand in that country, but scrap suppliers have also pointed to the transport problems in Europe as another reason for prices to keep rising.

Fastmarkets’ calculation for its daily index for steel scrap HMS 1&2 (80:20 mix) North Europe origin, cfr Turkey was $387.81 per tonne on Wednesday, up from $351.19 per tonne one week before.

Freight costs soar
Difficulty traversing the river has jacked up freight costs in Germany for alternative transport methods this week. Notably, the interruption to deliveries by river has resulted in increased competition for trucks and railway deliveries, leading to an increase in logistics costs.

River freight rates exploded over the last weeks, meaning it has become cheaper to deliver by truck now, Fastmarkets heard. Another problem is that there is a shortage of truck drivers in Germany with many workers on holidays, sources said.

Costs for shipping hot-rolled coil by truck were quoted at a minimum of €70 ($71) per tonne in Europe in the week to August 11, up from €20-30 per tonne earlier this year, according to the German steel trader.

A similar trend is also being reported for aluminium in Europe, now that demand for trucks has risen.

“It’s causing logistics headaches. A 5,000-tonne shipment that would go down the Rhine in a week or two now needs to be divided up into 25 tonnes per truck, and you can’t deliver and unload that many trucks in a day compared with a barge. For some of the larger plants, who take not just [aluminium] ingot but also slab, it’s definitely a concern, but the majority of those have sufficient material on ground to weather this,” said a third European trader.

“But costs are going up, and this is probably going to continue. These days it happens every year and starts in July. Come September, when metals need to start flowing again and plants want to start, it will cause headaches on the roads; it’s logistically a nightmare,” they added.

The plethora of logistical issues across European ports and trucking shortages have kept premiums supported since early 2022 despite increasingly bearish macro sentiment.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $520-550 per tonne on August 9, down from its record high of $600-630 per tonne in May but up from $320-345 per tonne one year earlier.

Meanwhile Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region) at $1,170-1,250 per tonne on August 5, down from the all-time high of $1,500-1,600 per tonne on April 29.

This compares with $900-950 per tonne on April 30, 2021.

In July, wildfires close to Trieste port in Italy blocked highways and passenger and freight trains in and out of the port, while strikes at a German port in June also caused further challenges.

Published by: Julia Bolotova, Lee Allen, Carrie Bone, Elina Virchenko