• Oil prices and fuel prices rose to their highest level since January 2006 in the first half of 2022. Freight rates fell slightly during the first half of 2022 but increased consistently due to the low water period of July and August 2022. Dry bulk spot market rates showed the strongest increase amongst the different market segments.
• Due to the low water period in summer 2022, the average loading degree of inland vessels sailing on the Upper Rhine went down from more than 56% in May 2022 to around 31% in August 2022.
WATERSIDE GOODS HANDLING IN MAIN UPPER RHINE PORTS
- Monthly data for waterside goods handling in Upper Rhine ports show that cargo handling was on an upward trend between August 2020 and August 2021, reflecting a recovery from the pandemic. But low waters in late 2021 and in mid 2022, as well as the impact of the war in Ukraine, put a stop to this trend.
- The war led to shortages in energy supply, strong price increases in the economy, and logistical disturbances. In the wake of this, cargo handling in inland ports was reduced.
- The effects of the 2022 low water period were confined to the months of July and August, when they unfolded a V-shaped reduction in cargo handling.
FIGURE 1: MONTHLY WATERSIDE GOODS HANDLING IN MAIN UPPER RHINE PORTS (IN MILLION TONNES)
Source: CCNR analysis based on data provided by the ports.
LOADING DEGREE OF DRY CARGO VESSELS AND NUMBER OF VOYAGES
- In order to study the effects of the low water period in summer 2022 in more detail, a database provided by the German Waterways and Shipping Administration was analysed. It entails detailed data about all dry cargo vessel voyages on the Upper Rhine (lock of Iffezheim) in the first eight months of 2022. The following variables could be extracted and quantified:
1) Average freight load per loaded voyage
2) Average loading capacity of vessels
3) Average draught of the vessel per voyage
4) Total number of loaded voyages (by all dry cargo vessels taken together)
5) Total volume of goods transported (by all dry cargo vessels taken together)
- Combining variables 1) and 2) allows the average loading degree of vessels (in percentage terms) to be determined. For this calculation, empty trips were not taken into account. The following graph shows a comparison of this indicator with the total number of loaded voyages (variable 4).
- With the onset of the low water period in July 2022, the average loading degree of vessels decreased from 53.7% in June to 42.1% in July. At the same time, the number of voyages remained rather constant (836 in June compared to 829 in July).
- In August 2022, water levels went down even further. This is reflected by a further decrease in the average loading degree of vessels (31.3%). Navigating conditions had become more difficult than in July, which is reflected by a reduction in the number of voyages that could be made (615 in August compared to 829 in July).
- As a result of reduced loading degrees in both months, and less voyages in August, the months of July and August saw a strong decline in the total amount of goods transported on the Upper Rhine (variable 5). In July 2022, the number of tonnes passing through the lock of Iffezheim was 49% lower than the figures recorded for July 2021. In August 2022, the reduction reached -77% compared to August 2021.
- It can also be observed that the average loading capacity of the vessels (variable 2) that were active on the Upper Rhine, changed during the low water period. While this average was 2,463 tonnes in the period from January to June, it reduced to 2,386 tonnes in July (-3%) and to 2,278 tonnes in August (-8%). Indeed, during this low water period in 2022, some of the largest vessels could barely use the Middle and Upper Rhine, with the result of a lower average vessel capacity in the observed operational figures.
FIGURE 2: NUMBER OF LOADED VOYAGES AND AVERAGE LOADING DEGREE PER VESSEL VOYAGE FOR DRY CARGO VESSELS AT THE IFFEZHEIM LOCK IN THE FIRST EIGHT MONTHS OF 2022
Source: CCNR analysis based on data from the German Waterway and Shipping Administration
FREIGHT RATES IN THE RHINE REGION4
- In the Amsterdam-Rotterdam-Antwerp (ARA) Rhine traffic of liquid goods, spot market freight rates fell slightly in the first half of 2022, simultaneously to the rising water levels. In July and August 2022, a pronounced low water phase then caused an extraordinary increase in freight rates (Q3 2022). Apart from these hydrological effects, freight rates have followed a downward trend since the beginning of 2019.
- Statistics Netherlands (CBS) collects freight rate data from a panel of Dutch IWT companies. These data are observed twice quarterly and include fuel and low water surcharges.
- Since the beginning of 2019, liquid bulk freight rates followed a downward trend, which matches the results from the PJK index.
- Dry bulk indices went up steeply. Booming coal transport is one explanation. Another explanation is the transfer of vessel capacity from the Rhine to the Danube region. According to estimations by brokers, around 3% of the dry cargo Rhine vessel capacity was transferred to the Danube region in 2022, where it was used to export Ukrainian grain (‘Solidarity Lanes’).
- In addition, indices for all market segments were pushed upwards during the low water periods in 2021 and 2022.
FIGURE 3: SPOT MARKET FREIGHT RATE EVOLUTION FOR GASOIL FROM THE ARA REGION TO RHINE DESTINATIONS (INDEX 2015 = 100) *
Source: CCNR calculation based on PJK International
* PJK collects spot market 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/Main.
FIGURE 4: FREIGHT RATE EVOLUTION PER QUARTER FOR DUTCH IWT COMPANIES ACCORDING TO MARKET SEGMENT (INDEX 2015 = 100, QUARTERLY DATA)
Source: Centraal Bureau voor de Statistiek (Binnenvaartdiensten; prijsindex)
FUEL COST EVOLUTION
- In the first half of 2022, prices for crude oil, diesel, gas oil, electricity and natural gas reached their highest level since January 2006. Indeed, air, inland waterway, road and rail freight transport levy energy surcharges in their tariffs. This allows the increase in energy prices to be partially passed on to customers.
- There is a very close correlation between fuel costs in inland navigation (gas oil prices) and oil prices, which serves as a basis for forecasting fuel prices (using oil price forecasts). The curves for the oil price and for the fuel or gasoil price are roughly at the same level, but it should be noted that the oil price is given in Euro per barrel (= 159 litres), while the fuel prices are given in Euro per 100 litres. Fuel prices are thus higher than crude oil prices in absolute terms.
- In the second quarter of 2020 fuel prices were at their lowest level since 2009 due to Covid-19. During the recovery from Covid-19, as well as during the on-going war in Ukraine, they rose to their highest level since the beginning of 2006 over the course of two years. Between mid-2021 and mid-2022, crude oil prices, together with fuel prices in inland navigation, roughly doubled.
- The IMF oil price outlook5 indicates a slight decline in oil prices in 2023 and 2024. This would imply that fuel costs would settle in a range between 80 and 100 Euro per 100 litre in 2023 and 2024. But the further geopolitical course will be decisive for the forecast horizon, especially with regard to the war in Ukraine. Escalations and de-escalations of this conflict can have a strong influence on the price development of crude oil and fuels.
FIGURE 5: 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.