The water levels on the Rhine hit critically low levels this week, which threatened to send the cost of transporting and handling a range of oil and chemicals even higher after several months of rising costs.
Freight and logistics costs have soared since the summer, with buyers and sellers struggling to cope with the supply length and a rise in commodity prices since the third quarter.
At 0500 GMT Wednesday, the Kaub section of the Rhine measured 65 centimeters, seven centimeters lower than at the same time on Tuesday, according to data from German Federal Waterways, and some market sources suggested on Tuesday that the the river could be closed if it hit 55 cm. However this was denied by the German authorities.
Vessel captains were in effect responsible for deciding whether it was safe to navigate along the Rhine in current low water level conditions, not the federal authorities who manage the German waterway, a spokesman at the German Directorate-General for Waterways and Shipping said Wednesday.
"The Rhine is never closed to shipping because of low water levels. Captains decide autonomously whether the water is deep enough for their vessels to continue their journey. If the draft of the vessel is too deep the captain will remain in harbor or at a mooring point," the spokesman said.
"The greatest limits on the depth of the shipping channel are on the Middle Rhine between Mainz and Coblenz. Vessels intending to sail in this area can navigate if they have a draft of 160 cm. Vessels with a light draft of over 160 cm which cannot reduce it by trimming (e.g. tugs and passenger ships) must stop their journey today," the spokesman added.
The water levels as measured at Kaub, Germany, were the benchmark for calculating the draft for the steep-sided stretch of the Middle Rhine.
The lowest water level seen at Kaub was 34 cm, which was in 2003, according to the spokesman.
The consistently low levels, below 100 cm, since the summer, have meant that barges transporting commodities, such as oil and chemicals along the Rhine have been restricted in the quantities they have been able to move to key consumption points along the river.
As a result, the cost of moving commodities as well as the time it takes to transport them have increased.
LOW RHINE WATER LEVELS HIT CHEMICALS BUYERS, SELLERS' LOGISTICS
The low water levels in the Rhine and the paralysis of the movement in chemicals has affected chemical markets in different ways.
In the European xylene market -- a key chemical used in the production of automotive car components, inks and solvents, truck prices have traded as high as Eur700/mt FD in Europe this week, as distributors have applied higher costs.
The inability of some suppliers to deliver trucks and barges has forced buyers to look elsewhere and to resort to suppliers using other means of transportation.
This has put pressure on rail and road truck delivery routes, with the availability of rail and road tanker cars now also limited, according to some sources.
"Today there's less availability. Distributors, one of them has a transportation problem due to the lower water levels on the Rhine. They may be out of the game and it allows others to realize higher prices," a distributor, who has benefited from the limited supply, said on Tuesday.
The distributor gave an example of how the higher costs have hit buyers and sellers, adding: "Normally you can bring in one or two barges, we [now] need five barges. It makes it five times more expensive and these barges are missed by others."
In other markets, the low Rhine levels have pushed storage up to capacity.
In the methanol market -- a key component in the production of construction and automotive applications, spot prices traded at Eur224/mt FOB Rotterdam, a five year and a half year low on Wednesday as the paralysis of transport along the Rhine for the past few months has backed-up product in the key Rotterdam trading hub.
These low prices have deepened discounts to the fourth-quarter contract price to around 24% and taken together with the 33% discount at the end of September, this gave term buyers an edge in the negotiations for 2016 which were starting, sources said.
"It is fair to assume that I don't know where the water will come from, but if you look at the forecast we don't know where the rain is," a trader said earlier this week.
German weather forecaster DWD is predicting light rain over the next 10 days, but the trader said this would be enough to change the situation.
