2. OPERATING CONDITIONS

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• The year 2020 offered rather positive navigation conditions on the Rhine. At Kaub (Middle Rhine), the available draught was at least 1.90 m or higher on 87.3% of all days per year, compared to 98.3% in 2019 and only 63.5% in 2018.
• Fuel prices (gasoil/diesel) fell by 32 % between Q1 2020 and Q2 2020. Between Q2 and Q3 they rose again (by 17%) but dropped by 3 % between Q3 and Q4.
• For 2021, fuel prices are expected to experience a limited increase by 5-7%, based on oil price forecasts.

 
 

IMPACT OF WATER LEVEL CONDITIONS

  • The Waterway and Shipping Administration endeavours to achieve a minimum navigation channel depth for each gauge station, also under critical low water conditions. This minimum depth is represented by the vertical distance below a critical low water level. The critical low water level is known as equivalent water level. It is normally exceeded on at least 95% of all days per year. The following table shows these parameters, which are specific for each gauge station, for Kaub (Middle Rhine) and Duisburg-Ruhrort (Lower Rhine).

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    TABLE 1: NAVIGATIONAL PARAMETERS FOR IMPORTANT RHINE GAUGE STATIONS

    Gauge stationAreaEquivalent water level (EWL)Minimum navigation channel depth under the EWLUnder keel clearance
    Duisburg-RuhrortLower Rhine233 cm280 cm27 cm
    KaubMiddle Rhine78 cm190 cm32 cm

    Source: German Federal Waterways and Shipping Administration
     

  • The available draught for a vessel at a certain gauge station is calculated with the formula (Regarding the formula, see: 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):
    possible or available draught = minimum navigation channel depth + (actual water level – equivalent water level) – under keel clearance.
  • If the actual water level equals the equivalent water level (indicating that the water level is very low), the difference (actual water level – equivalent water level) will be zero. In this case, the possible draught of a vessel should still be equal to the minimum channel depth minus the under-keel clearance (see formula and drawing).

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    FIGURE 1: ACTUAL WATER LEVEL, ACTUAL DRAUGHT, EQUIVALENT WATER LEVEL, MINIMUM NAVIGATION CHANNEL DEPTH AND POSSIBLE OR AVAILABLE DRAUGHT AT KAUB/ MIDDLE RHIN *


    Source: CCNR based on German Federal Institute of Hydrology (BfG, 2015)
    * The distances in this drawing are not at scale.
    In this illustration, the date chosen to determine the available or possible draught is 3 September 2020, when the actual water level was 239 cm on average).
     

  • For the following figures, daily water level data for Kaub and Ruhrort were collected in order to verify to which extent the minimum navigation channel depth was actually achieved (at which percentage of all days per year).

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    FIGURE 2: AVAILABILITY OF DRAUGHT VALUES FOR THE MIDDLE RHINE AT KAUB (IN %)


    Sources: CCNR calculation based on data from the German Federal Waterways and Shipping Administration, provided by the German Federal Institute of Hydrology (BfG).
     

  • The minimum navigation channel depth of 1.90 m was achieved at Kaub:
    – In 2018: on 63.5% of all days per year
    – In 2019: on 98.3% of all days per year
    – In 2020: on 87.3% of all days per year
  • The fact that the ‘achievement rate’ in 2018 and 2020 was lower than the target rate of 95% reflects the occurrence of strong low water periods in both years.
  • Duisburg-Ruhrort at the Lower Rhine offers higher water levels, channel depths and possible draughts in general, due to different morphological characteristics of the Rhine at this point. This is reflected by a higher target depth (2.80 m), but it was only in 2019 that this target could be reached at a rate of at least 95%.

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    FIGURE 3: AVAILABILITY OF DRAUGHT VALUES FOR THE LOWER RHINE AT DUISBURG-RUHRORT (IN %)


    Sources: CCNR calculation based on data from the German Federal Waterways and Shipping Administration, provided by the German Federal Institute of Hydrology (BfG).
     

  • Equivalent calculations can be carried out for the Danube. Two gauge stations on the Upper Danube in Austria are considered: Kienstock (122 km east of Linz and 90 km west of Vienna) and Wildungsmauer (250 km east of Linz and 38 km east of Vienna). The target depth for both stations is 2.50 m. The results of the data analysis show that Kienstock offered better navigational conditions than Wildungsmauer in 2018-2020.

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    TABLE 2: NAVIGATIONAL PARAMETERS FOR IMPORTANT UPPER DANUBE GAUGE STATIONS

    Gauge stationAreaEquivalent water level (EWL)Minimum navigation channel depth under the EWLUnder keel clearance
    KienstockUpper Danube164 cm250 cm40 cm
    WildungsmauerUpper Danube162 cm250 cm40 cm

    Source: Via Donau and Federal State of Lower Austria
     

    FIGURE 4: AVAILABILITY OF DRAUGHT VALUES FOR THE UPPER DANUBE AT KIENSTOCK (IN %)


     

    FIGURE 5: AVAILABILITY OF DRAUGHT VALUES FOR THE UPPER DANUBE AT WILDUNGSMAUER (IN %)


    Source: CCNR calculation based on data from the Federal State of Lower Austria (https://www.noel.gv.at/wasserstand/#/de/Messstellen/Map/Wasserstand)
     
     

FREIGHT RATES IN THE RHINE REGION

  • Until October, gasoil and gasoline spot market freight rates on the Rhine remained rather low. In particular, full tanks and limited downstream refining activities – especially for motor fuels due to “lockdowns” – caused a significant drop of transport activity. Towards November and December 2020, higher seasonal demand for liquid cargo pushed freight rates up and this was supported by rapidly falling water levels.
  • In October, November and December 2020, gasoil freight rates were much lower than in the same months one year earlier. For the Lower Rhine, the average difference in Q4 2020 compared to Q4 2019 was -31%, and for the Upper Rhine even -33% and -29% for the Main. The percentage differences for gasoline were of the same order (-29%, -32%, -28%) (The figure for gasoline freight rates is not shown in the report, as it appears very similar to the graph for gasoil freight rates).

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    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.
     

  • While the freight rates presented in the above figure relate to spot market rates for ARA-Rhine traffic, the IWT market also experiences more long-term transport prices, which are quite frequently observed in the market segments of chemicals and container transport. Such data are collected by the statistical office of the Netherlands (CBS) from a panel of Dutch IWT companies, together with spot market rates. The prices of established routes within the panel are observed twice a quarter and include fuel and low water surcharges.
  • Regarding the overall development of these data, a smaller ‘low water elasticity’ – or reactivity of transport prices toward low waters – is present (This can be verified by taking quarterly averages of the monthly ARA-Rhine index and comparing them with the quarterly index data from CBS. The average of the spot market rates for the ARA-Rhine index was around 300 in Q4 2018, while the highest value in the CBS index in this quarter was around 200). This is explained by the fact that the sailing regions of the barging companies in this CBS panel contain also regions other than the Rhine itself. In parts of the Netherlands, water level fluctuations are less pronounced than on the Rhine in Germany.

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    FIGURE 7: FREIGHT RATE EVOLUTION PER QUARTER FOR DUTCH IWT COMPANIES ACCORDING TO MARKET SEGMENT (INDEX 2015 = 100)


    Source: Centraal Bureau voor de Statistiek (Binnenvaartdiensten; prijsindex)
     

  • For Q3 2020, the data show a decline of 12% of the overall index, compared to Q3 2019. The decrease was strongest for liquid bulk (-18%), although this was still a smaller decrease than the one observed for ARA-Rhine trade (see figures above). A different regional scope of the CBS index, as explained above, can be regarded as the underlaying cause. In Q1 2020 and Q2 2020, the drop of the liquid bulk index was only 7%.
  • In the first half year 2020, the strongest fall of the index can be observed for dry bulk spot market freight rates. The drop was thus -17% in Q1 2020 and -14% in Q2 2020 (compared to Q1 2019 and Q2 2019 respectively). In Q3 2020, dry bulk spot market rates fell by 10%.

 
 

COST EVOLUTION

    FUEL COSTS

  • 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 data are received from ITB in Belgium. The prices are maximum prices and valid for a purchase volume of at least 2.000 litres of gasoil.). A comparison with oil prices reveals a very close correlation which serves as a basis for an outlook on fuel prices.
  • In the course of 2020, positive news about vaccines and their approaching availability brought oil prices back to higher levels. In December 2020, the Brent Spot market price once more reached a level of 50 US-dollars per barrel (= 41.1 euro, as the exchange rate USD/EUR was 1.217).

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    FIGURE 8: 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 (historical exchange rate US-dollar/euro). 1 barrel (bbl) = 159 litres
    * IMF = International Monetary Fund; EIA = US Energy Information Administration. The forecast assumes a nominal exchange rate of 1.22 US-$ per euro throughout 2021 and 2022.
     

  • Fuel prices in European IWT are not only influenced by oil prices but also by the exchange rate between US-dollar and euro. The depreciation of the US-dollar towards the euro, which started in March 2020, continued throughout the year 2020. This dampened fuel prices in European IWT (In December 2020, the exchange rate was 1.217 US-dollar per euro, compared to 1.126 US-dollar per euro in June 2020, and 1.110 US-dollar per euro in January 2020).
  • Arguments for a further depreciation of the dollar are put forward by some organisations, which see the US twin deficits as a striking argument for a further devaluation of the dollar (QCAM Monthly. 2021. Available at: (https://q-cam.com/wp-content/uploads/2021/02/QCAM-MONTHLY-February-2021.pdf) Last consulted 5.02.2021). Other observers (including OECD) put forward the very small interest differential between the two currency zones and therefore foresee a constant exchange rate in 2021 and 2022 (Raiffeisen Währungsupdate 2021. Available at: https://www.raiffeisen.ch/content/dam/www/rch/pdf/publikationen/waehrungsupdate/de/2021/waehrungsupdate-01-2021.pdf Last consulted 5.02.2021)(OECD. Nominal exchange rates against US dollar, average of daily rates. 2021. Available at: https://stats.oecd.org/Index.aspx?QueryId=51653# Last consulted 5.02.2021). For the present forecast, an exchange rate USD/EUR of 1.22 is assumed for the forecast horizon (2021 and 2022).
  • Regarding oil prices, in its latest short-term outlook from January 2021, the US Energy Information Administration (EIA) forecasts Brent crude oil spot prices to average around 52.7 US-dollars per barrel in 2021, and around 53.4 US-dollars per barrel in 2022, compared with an average of 41.8 US-dollars in 2020 (Source: https://www.eia.gov/outlooks/steo/. These values are transformed to values in euro and depicted in the figure. The assumed exchange rate for this transformation is 1.22 US-dollar per euro). The IMF oil price outlook points to similar values.
  • Based on the data and the reasoning explained, an increase in fuel costs of 7.2% is expected for 2021. This is slightly higher than the forecast within the Panteia cost monitoring (+4.7% in 2021).

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    CAPITAL COSTS

  • Capital costs are dependent upon interest rates for long-term loans and the insured values of vessels. Interest rates decreased in 2020, as – in the wake of the economic crisis in the last years – short-term interest rates were consequently cut by the European Central Bank. In the medium and long term, lower short-term interest rates are passed on to lower long-term interest rates.
  • The development of interest rates in the recently published Panteia cost report (Source: Panteia (2021), Kostenontwikkeling binnenvaart 2020 en raming 2021, edited in January 2021) shows a decline over the last years. For 2021, capital costs are expected to decrease further, as interest rates will be kept very low, and insurance values of ships will decrease due to the crisis in the inland waterway transport sector. It should be noted that available interest rates do not include individual risk premiums, that could be added on top of the interest rates by banks, in order to cover higher individual risks of companies.

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    LABOUR COSTS

  • An analysis of labour costs was carried out in the Panteia cost report, published in January 2021. Due to a deviation of actual wages from official wages, interviews amongst IWT companies were necessary. According to these interviews, labour costs increased in 2020 by 2.8% compared to 2019. Other sources used for the labour costs assessment were official salary tables published by the ‘Centraal Bureau voor de Rijn- en Binnenvaart’ (CBRB) in the Netherlands. For 2021, labour costs are assumed to increase further, as the Covid-19 crisis leads to higher burdens for manning vessels.

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    INSURANCE COSTS

  • In 2020, insurance companies have increased insurance premiums by 3.3%. As the value of the insured vessels dropped by 0.4%, insurance costs increased by 2.9%. For 2021, insurance premiums are expected to continue their increase by 2.9%. A limited drop in the values of vessels by 0.4% will again lead to higher insurance costs for companies. The sources of these estimations are consultations with insurance companies and barging companies.

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    REPAIR AND MAINTENANCE COSTS

  • On the basis of interviews with a panel of inland barging entrepreneurs, it is estimated that these types of costs increased in 2020 by 2.3% and will increase in 2021 by 2.0%.

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    TABLE 3: DEVELOPMENT OF COSTS IN INLAND WATERWAY TRANSPORT (2020/2019) AND OUTLOOK FOR 2021

    Cost componentIndex 2020 (2019=100)Index 2021 (2020=100)
    Labour costs102.8102.3
    Capital costs
    - interest rates92.396.0
    - insured value of vessel99.699.6
    Fuel costs83.3104.7
    Repair and maintenance102.3102.0
    Insurance costs102.9102.4
    Other costs101.2101.3

    Source: Panteia (2021)
     
    SHARE OF LABOUR COSTS IN TOTAL COSTS AND IN TURNOVER

  • According to data from the statistical office of the Netherlands (CBS), the share of personnel costs within total costs in the Dutch IWT sector (freight and passenger transport) was 18.0% in 2018, 21.8% in 2017, and 23.0% in 2016. In the years 2009-2015, the share was 22.0% on average.
  • The share of personnel costs within net turnover was 15.3% in 2018, 18.3% in 2017 and 18.7% in 2016. In the years 2009-2015, the share was 18.8% on average.