Drought: Low water puts industry at risk

The European chemical and pharmaceutical industries face mounting challenges due to critically low water levels on the Rhine River, which has become a lifeline for major companies such as Roche, Novartis, Lonza in Basel, and German firms including BASF, Bayer, Evonik, Lanxess, and Covestro. The river serves both as a cooling mechanism for industrial facilities and a crucial transportation route for goods. This dual role has remained unchanged over more than a century. However, current drought conditions have disrupted this vital infrastructure, creating logistical bottlenecks and threatening supply chains. The situation has worsened at a particularly inopportune time. Asian chemical producers had previously reduced output due to oil delivery disruptions from the Gulf, allowing European manufacturers to gain market share. Now, with prolonged dry weather persisting, some companies are experiencing partial supply chain interruptions. BASF, one of Europe's largest chemical producers, reports that while efforts have been made to maintain operations through the use of specialized low-water ships and alternative transport methods, there are still concerns regarding the sustainability of these measures. Kaub, a critical bottleneck along the Rhine, has emerged as a focal point of concern. According to company statements, 40 percent of transported materials, including essential raw material Naphtha, pass through this section. BASF operates three ports, including an oil terminal, but the narrow passage between North Sea ports and its main plant poses a competitive disadvantage compared to rivals in Leverkusen. In 2018, when the channel was temporarily impassable, the company suffered losses amounting to nearly half a billion euros. Since then, BASF has implemented early warning systems and significantly increased its fleet of low-water vessels, even commissioning new ones from shipbuilder Stolt. These vessels can navigate waters as shallow as 1.6 meters, equivalent to a level of 30 at Kaub. However, authorities predict the water level will drop below 15 this Monday, raising questions about whether these vessels can continue operating under such conditions. Matthias Zachert, CEO of Lanxess, highlighted the severity of the issue, noting that current additional logistics costs are in the single-digit millions. He emphasized that ships are currently being loaded only up to 20 to 30 percent capacity, and many loading and unloading points are already inaccessible. “Now we must see how long this situation lasts,” he stated. “The risk is a production halt.” Despite these challenges, Lanxess claims all necessary volumes for the coming weeks are secured via alternative transport routes. In response to the crisis, Lanxess established a crisis team five weeks ago, engaging daily with procurement teams, suppliers, and logistics partners. “Thanks to this, we were able to shift many transports to roads and railways,” Zachert explained. Additionally, since the last low-water period in 2018, the company invested heavily in adapting facilities originally dependent solely on water transport, enhancing flexibility in operations. While the industry appreciates policy initiatives aimed at increasing flexibility, such as relaxing truck driver regulations on Sundays, concerns remain about long-term implications. The steel industry association warns of potential permanent disadvantages caused by low water levels, emphasizing the need for accelerated optimization of loading areas along the middle and lower Rhine, strengthening rail as a reliable alternative route, and securing additional transport capacities during crises. The ongoing situation underscores the deep reliance of the chemical sector on the Rhine's navigability, highlighting the urgent need for adaptive strategies to mitigate future risks posed by climate-related water level fluctuations.