Alongside rampant wildfires, low water levels that disrupt shipping are also becoming a normal feature of summer in Europe — and this year is no exception, National Bank Financial Inc. (NBF) says in a new research note.
The Rhine river — a critical inland shipping channel — is facing record low water levels, raising shipping costs and weighing on economic growth, the note said.
“The lack of rainfall and the high temperatures recorded since the beginning of summer have effectively dried up the river,” NBF said.
The lack of water in the Rhine is, in turn, disrupting shipping activity.
“At best, these developments have forced shipping companies to limit the weight of their barges’ cargo in order to reduce their draft,” NBF noted. “At worst, they have forced shipowners to halt operations, leaving businesses that depend on goods from upstream with no choice but to turn to invariably more expensive alternatives, such as rail or truck transport.”
As a result, shipping rates have risen to all-time highs, it said.
The price of fuel has soared too, thanks to the ongoing conflict in the Middle East.
“These disruptions will undoubtedly reduce economic growth and put upward pressure on prices in the eurozone, but the extent to which this will be the case depends on future weather conditions,” NBF said.
If the drought continues, the disruption will deepen, and economic pressures may intensify.
“The fact that the Rhine’s water level generally does not reach its lowest point of the year until September or October is certainly a cause for concern,” it said.