• In the Rhine region, freight rates for dry cargo followed a downward trend in the first half of 2020. Spot market rates for coal, iron ore and metals were around 21-22% lower in the Rhine region, compared to the first half year of 2019. Freight rates for sands, stones, gravel and agribulk also decreased, but in a less pronounced manner.
• Spot market freight rates for mineral oil products mostly decreased in the first half year of 2020, the month of May being the only exception, when the return to a 24 hours a day operation of locks on the Upper Rhine brought a temporary upward movement in freight rates (due to more transport demand).
• Turnover development per country shows a limited decrease for goods transport (e.g. -9% in the second quarter of 2020 in Germany), but a very clear decrease for passenger transport. For French passenger transport companies, financial turnover was 91% lower in the second quarter of 2020 compared to Q2 2019.
IMPACT OF WATER LEVEL CONDITIONS
- The available or possible draught of a vessel is an important economic parameter. A high possible draught enables high loading degrees, thereby realising economies of scale and high transport volumes, and lowering unit costs. A detailed model for estimating the effect of low water on the loading capacity of inland ships of different types and size was recently published in the European Journal of Transport Infrastructure Research (Van Dorsser, C. et al. Effect of low water on loading capacity of inland ships. European Journal of Transport and Infrastructure Research, v. 20, n. 3, p. 47-70, sep. 2020. ISSN 1567-7141. Available at: https://journals.open.tudelft.nl/ejtir/article/view/3981). For IWT as a whole, high loading degrees could enable IWT to gain modal shares on the transport market.
- The available or possible draught of an inland vessel can be calculated on the basis of the actual water level, the equivalent water level and the minimum navigation channel depth that is guaranteed by the waterway administration under the condition of the equivalent water level. In addition, a security margin under the keel (under keel clearance) has to be taken into account (Possible or available draught = minimum navigation channel depth + (actual water level – equivalent water level) – under keel clearance). The equivalent water level refers to a low water level under which, on a 30-year average, the water levels do not fall below more than 20 ice free days per year.
- The figure below illustrates a vessel sailing with a certain actual draught (due to a certain weight of goods loaded) at the gauge station of Kaub/Middle Rhine. At this gauge station, the equivalent water level is 78 cm, and the related minimum navigation channel depth 190 cm. For the under keel clearance, 32 cm were assumed. The chosen date to determine the available or possible draught in this illustration is 3 September 2020, when actual water levels were 239 cm on average.
- In the example above, it can be seen that the vessel could have loaded more weight as it did not fully exploit the available or possible draught on that day at Kaub.
- From the viewpoint of the German waterway administration, for a river bed with sand or gravel soil, an under keel clearance of at least 20 cm is sufficient. The under keel clearance for a rocky river bed should be between 20 cm and 40 cm.
- The following figures show the available draught for several important gauge stations on the Rhine and the Danube until August 2020 (In these calculations, the following values were taken for the under-keel clearance: 32 cm for Kaub, 21 cm for Maxau, 27 cm for Duisburg, and 40 cm for the three Danube gauge stations. The values regarding the Rhine stations are published in a report by the Swiss Association of Shipping and Port Economics (see the article written by the Swiss Association of Shipping and Port Economics (Schweizerische Vereinigung für Schifffahrt und Hafenwirtschaft), in: SVS Aktuell, Dec. 2018/Jan. 2019, pages 7 and 8, available at: http://www.svs-ch.ch/sites/default/files/svs-aktuell/winter_2018.pdf). The values regarding the Danube are recommended by viadonau).
FIGURE 1: ACTUAL WATER LEVEL, ACTUAL DRAUGHT, EQUIVALENT WATER LEVEL, MINIMUM NAVIGATION CHANNEL DEPTH AND POSSIBLE OR AVAILABLE DRAUGHT AT KAUB/MIDDLE RHINE *
Source: CCNR based on German Federal Institute of Hydrology (BfG) (2015).
* The distances in this drawing are not at scale.
FIGURES 2 AND 3: IMPACT OF HYDRAULICITY – AVAILABLE OR POSSIBLE DRAUGHT OF VESSELS AT IMPORTANT GAUGING STATIONS ALONG THE RHINE AND DANUBE (IN CM)
Sources: CCNR calculation based on data from the German Federal Waterways and Shipping Administration, provided by the German Federal Institute of Hydrology (BfG), and data from the Federal State of Lower Austria (https://www.noel.gv.at/wasserstand/#/de/Messstellen/Map/Wasserstand).
FREIGHT RATES IN THE RHINE AND DANUBE REGIONS
- Dry cargo freight rates (spot market) in the Rhine region came under pressure in the first half of 2020. According to freight rate data collected by Panteia, freight rates for coal, iron ore and metals had the strongest reduction compared to the first half of 2019, with -22% (coal and iron ore) and -21% (metals). The structural decline in coal transport, and the negative effects of Covid-19 on steel production and automobile production can largely explain this trend.
- For sands, stones and gravel, as well as agribulk, the decrease in freight rates was somehow smaller (-6% and -17% respectively). Freight rates in container transport (spot market rates) were, in the first half of 2020, 23% lower than in the same period one year earlier. It should be noted that most container ships operate under a time charter agreement. The evolution shown in the graph concerns spot market freight rates and can therefore differ from time charter rates.
- Factors which supported spot market freight rates for liquid cargo transport on the Rhine in the first half year of 2020 were low oil prices and relatively low water levels (see figures above). Low spot market oil prices, in combination with a ‘contango’ (Contango is a situation where spot market prices are below prices for a future delivery of oil products) situation on future oil markets, meant that importers saw it as profitable to import oil products, store them and get their price risk covered by the future market. At the beginning of May 2020, the restoration of the 24 hours a day operation of Upper Rhine locks brought some temporary extra transport activity, reflected by a sudden upward movement in freight rates.
- This effect subsided in June and in the following months, so that freight rates decreased. In July, August and September 2020, gasoil freight rates were much lower than in the same months one year earlier. For the Lower Rhine, the average difference in Q3 2020 compared to Q3 2019 was -47%, and for the Upper Rhine even -51%, and -57% for the Main. These strong reductions in autumn 2020 can be explained by the fact that the usual replenishment effects for heating oil were barely present in autumn 2020, as depots had already been filled up in the spring when oil prices dropped sharply (see chapter 1).
- In Q1 2020, freight rates in Danube navigation – in downstream transport – were 24% higher than in Q1 2019. It was the increase in downstream transport of grain (see chapter 1), which triggered this uptake. Within upstream transport, freight rates went down (-9%) due to less iron ore transport during the first months of 2020 (see chapter 1). There was also a reduction in fuel prices due to lower oil prices, by -7% compared to 2019.
FIGURES 4 AND 5: FREIGHT RATE EVOLUTION FOR DRY CARGO IN THE RHINE REGION (INDEX 2015 = 100)
FIGURE 6: FREIGHT RATE EVOLUTION FOR GASOIL FROM THE ARA REGION TO RHINE DESTINATIONS (INDEX 2015 = 100) *
Source: CCNR calculation based on PJK International
* PJK collects freight rates (in Euro per tonne) for ARA-Rhine trade of liquid bulk. The CCNR transforms these values into an index with base year 2015. Lower Rhine: Duisburg, Cologne. Upper Rhine: Karlsruhe, Basel. Main: Frankfurt/M.
FIGURE 7: FREIGHT RATE EVOLUTION IN DANUBE NAVIGATION (INDEX Q4 2018 = 100)
Source: Danube Commission Market Observation report
QUARTERLY IWT TURNOVER EVOLUTION PER COUNTRY IN EUROPE
- In Q1 2020, turnover from IWW passenger transport in France was 35% below the Q1 2019 value. In Q2 2020, IWW turnover fell by 91% compared to the same quarter one year earlier.
- By mid-March, the time when the cruise season normally starts, the whole activity of passenger transport (river cruises and day trip excursions) halted completely. It was only at the end of May that some day trip vessels and small cruise vessels took up their activity, although with a rather limited number of passengers. Larger cruise vessels were authorised to sail only from the first half of July onwards (See the article in the journal NPI « Accompagner les entreprises, une priorite absolue », September 2020). However, not all large river cruises resumed their operation. For instance, Viking river cruises, a company which proposes river cruises in France, decided to extend the suspension of operations applying to all its river cruises until the end of 2020.
- The harsh reduction in turnover in France can be explained by the almost complete absence of overseas (US-Americans, Canadians, Australians) and British tourists. These source markets play an essential role as clients for passenger shipping in France, in particular within the segment of cruise traffic (both large and small cruise vessels).
- Turnover in German passenger transport dropped by 11% in Q1 2020 compared to Q1 2019. In Q2 2020, due to the cancellations of river cruises and day trip excursions on a large scale, turnover from IWW passenger transport was 72% below the level of Q2 2019. It is noted that this decrease was lower than in France, due to the explained structure of the demand side according to nationalities. In maritime and coastal shipping, the rate of reduction was even higher, at 85%.
- Comparing the evolution in maritime/coastal shipping with inland waterway transport, it can be observed that the reduction of turnover from cargo transport amounted to -9% in Q2 2020 in IWT, compared to -19% in maritime/coastal shipping. In the German cargo sector, the Covid-19 pandemic therefore had a more severe effect on turnover in the maritime segment than in IWT. These figures confirm also that turnover in cargo transport was less effected than turnover in passenger transport.
- In the Dutch transport sector, turnover in IWT (freight and passenger transport taken together) is dominated by freight transport (92% of total turnover). Total turnover dropped by 7% in Q1 2020 (compared to the same quarter one year earlier), while there was an increase by 5% in maritime and coastal shipping. In the second quarter of 2020, the quartely year-on-year reduction in turnover amounted to -17% in IWT, and to -5% in maritime and coastal transport.
- Although separate figures for passenger transport in the Netherlands are not available, some experiences from shipping companies can already shed some light on the effects of the Covid-19 pandemic. An article about a day-trip shipping company, active on the river Ijssel, indicates a reduction of turnover by 70% in March and April (See the article ”Rederij Celjo signaleert licht herstel rond-en partyvaart”, in: Weekblad Schuttevaer, 2 September 2020). Meanwhile, the activity is recovering, but with a low capacity utilisation. For instance, one of the said company’s vessels has a capacity of 250 passengers, but it can only receive 70 passengers at present to comply with the current sanitary requirements.
- Some cases of passenger companies whose turnover was not negatively affected by Covid-19 also exist. For instance, a company with three small historical watertaxis (with a capacity inferior to 10 passengers) in Dordrecht reported that by intensifying its marketing activity in the region, targeting the local population, the reduction in the number of foreign tourists could be compensated (See the article in Weekblad Schuttevaer: “Rondvaartschip Si Barone beleeft beste seizoen ooit”, 7 September 2020).
- In Austria, total turnover from inland waterway transport is dominated by passenger transport, due to the higher number of companies active in this field (There are no up-to-date figures for the split of turnover between freight and passenger transport for Austria. The latest figures available are for the year 2014, and they show a share of 56% of passenger transport in total IWW turnover. It can be strongly assumed that this share has risen further in the years 2015-2019, due to the absence of growth in freight transport, and a growing activity in passenger transport). In Q2 2020, a 68% decrease in total Austrian IWT turnover could be observed compared to Q2 2019, which is very similar to the effect in German passenger transport where the observed drop was 72%.
FIGURE 8: TURNOVER EVOLUTION OF FRENCH PASSENGER TRANSPORT COMPANIES (INDEX 2015 = 100)
Source: INSEE – Indice de chiffres d’affaires
FIGURE 9: TURNOVER EVOLUTION OF GERMAN PASSENGER TRANSPORT COMPANIES (INDEX 2015 = 100)
FIGURE 10: TURNOVER EVOLUTION OF GERMAN GOODS TRANSPORT COMPANIES (INDEX 2015 = 100)
FIGURE 11: TURNOVER EVOLUTION OF DUTCH TRANSPORT COMPANIES (INDEX 2015 = 100)
FIGURE 12: TURNOVER EVOLUTION OF AUSTRIAN IWW TRANSPORT COMPANIES (INDEX 2015 = 100)
Source: Eurostat [sts_setu_q]
- Fuel costs are analysed on the basis of gasoil/diesel prices published by the energy price monitoring system of the Belgian Ministry of Economic Affairs. The prices are maximum prices and valid for a purchase volume of at least 2,000 litres of gasoil. As the following figure shows, there is a strong correlation with the evolution of crude oil prices (Brent).
- With decreasing oil prices in the first half of 2020, fuel prices declined as well and both indicators picked up only slightly in Q3 2020. With declining fuel costs, inland navigation companies, faced with reductions in transport demand, experienced a reduction in their operational costs.
- Fuel prices are expected to remain low in 2021. Next to low oil prices, the depreciation of the US-Dollar towards the Euro plays another role. This trend started in May 2020 and is expected to continue in 2021, due to stronger economic damages in the US in the wake of the Covid-19 crisis compared to Europe (See the article in the ”Handelsblatt”, 13 August 2020, with an interview with professor of economics, Dr. Bernd Rürup).
- A decrease in fuel costs is also expected by Panteia in its cost monitoring, released in February 2020. The reduction in fuel costs is especially relevant for capital intensive new vessels, which have to sail a great number of hours in order to reach the reimbursement of their loans. Next to fuel costs, capital costs are also expected to decrease, as the Covid-19 crisis leads to lower interest rates due to more liquidity flooding the markets and interest rate cuts, in order to stimulate the economy in Europe.
FIGURE 13: AVERAGE FUEL PRICES ACCORDING TO THE BELGIAN MINISTRY OF ECONOMIC AFFAIRS AND BRENT CRUDE OIL PRICES INCLUDING FORECAST *
Sources: ITB and SPF Economie (fuel price), US Energy Information Administration (oil price), Federal Reserve Economic Data (exchange rate US-Dollar/Euro)
* Oil price forecast from IMF World Economic Outlook, April 2020. This forecast contains the assumption of an appreciation of the Euro (= depreciation of the US-Dollar) from 1.18 US-$ per Euro in September 2020 up to 1.22 US-$ per Euro in Q4 2022. 1 barrel (bbl) = 159 Litre.
FIGURE 14: U.S. DOLLAR / EURO FOREIGN EXCHANGE RATE, U.S. DOLLARS TO ONE EURO (DAILY DATA)
Source: Federal Reserve Economic Data (https://fred.stlouisfed.org)