Dry Rhine | Armstrong Economics

Drought across Europe caused major problems. In Germany, the Rhine has almost evaporated. Cargoes were forced to reduce their tonnage across the river, but some abandoned the course altogether. German authorities have not closed off the river but are allowing shippers to cross at their own risk – a risk not many are willing to take. Cargo ships were sailing from half to full quarter, according to Reuters, adding to a supply chain bottleneck. Many companies are switching to rail transport but that will take time.

About 80% of all goods transported to Germany come through the waterways across the Rhine and this passage is important for all of Europe. The last major drought occurred in 2018, prompting German authorities to close the corridor for 132 days, almost causing a financial crisis. The water level dropped to 27 cm in October 2018, and the water levels are rapidly declining.

Authorities will try to deter shipping halts again, but there won’t be much they can do if water levels continue to drop. Some estimate that the Rhine will be closed to ships on Friday. The fallout will be much worse than in 2018, when there was no shortage in the global supply chain exacerbating inflation.

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