Rhine Freight Rates on the Rise Due to Supply Disruptions
In recent weeks, Rhine freight rates for transporting liquid bulk products up the Rhine rose significantly to the various destinations as market players cope with the retreating water levels, lack of available barges and a necessary re-supply of product into tanks.
The hefty backwardation in the gasoil markets, seen since the start of the Russian invasion of Ukraine, has prompted traders to cut back on stocks in hinterland depots and only move the bare minimum of product into tanks.
The current rise in demand from end consumers, along with a expected cutback in natural gas usage in favor of diesel and heating oil, adds up to the problems the market currently faces. Next, barges are in most cases secured for medium and long-term on a Time Charter basis or face long waiting times before loading at various terminals in ARA, thus limiting the spot barge supply even further.
Traders are not able to cover their positions and there are therefore concerns over local product availability, as alternatives like rail deliveries are coping with staff shortages and not all barges will be able to travel past bottlenecks like Kaub (draughts expected to drop below 150cm) and Maxau (expected to drop below 140cm) in the coming days. Freight rates were stable and low during the spring, although the warmer and dry weather has caused an early snowmelt season in the Alps. Since May, water levels have been retreating which started limiting the supply of product.
The situation deteriorated in July, with water flows currently reaching thresholds normally seen during autumn and even hitting the bottom of the five-year range, firmly below the levels seen during the drought period starting August 2018. This has all led to the freight rate levels we currently see in the market, with no idea when this situation will stabilize.
Insights Global keeps track of the spot market up the Rhine and in ARA and publishes daily benchmark rates that reflect the current market conditions. If you are interested in more information, please feel free to contact me or the office via firstname.lastname@example.org!