• The Covid-19 crisis could lead to an estimated drop in IWW goods transport in 2020 of 20-25%. Danube ports data for March-April 2020 showed a decrease of 25-35%. Everywhere in Europe, passenger transport was almost at a complete standstill in the first half of 2020.

• Energy transition, in particular the phasing out of coal, and a stagnating or even declining steel production in western Europe, represent major challenges for inland navigation in western Europe over the coming 20 years. Concerning the Danube region, steel production is expected to grow further, due to a lower current steel intensity in Danube countries and catch-up effects.

• Container transport on inland waterways is heavily dependent upon maritime container transport and world trade. For some years now, world trade and seaborne trade have grown at lower rates, and this will be amplified further by the current pandemic crisis.

 
 

SHORT-TERM IMPACT OF THE COVID-19 CRISIS

(Sources: Stakeholder interviews, Ports mentioned in this part, Seatrade Cruise News, Binnenschifffahrt online, Travel Weekly, ABN AMRO, Entreprises Fluviales de France (E2F), German Federal Ministry of Transport and Digital Infrastructure, DVZ, NPI, Der Bundesverband der Deutschen Binnenschifffahrt (BDB), Centraal Bureau voor de Rijn en Binnenvaart (CBRB), BLN Schuttevaer, Maritime Executive)

This part of the chapter “Outlook” takes account of the latest available information at the end of May 2020.

  • The consequences of the Covid-19 crisis for the economy overall, the transport and logistics sectors, including inland navigation (both goods and passenger transport) are and will continue to be severe. The impact of the pandemic on the sector is expected to be felt long after the health crisis comes to an end. Based on GDP forecasts for the EU for 2020 and a comparison with the results for the 2009 financial crisis, a possible reduction of freight transport activity of at least 20-25% is estimated. Available port figures for April 2020 seem to confirm this estimation. However, such effects will depend on the type of commodity, the type of company, and the country and region observed (The precise effects will only be known when port figures become available for the months of April, May and June).
  • There are four main ways in which the inland navigation transport chain has been/is still impacted:
    – reduction in freight volumes at all levels, as a result of reduced/stopped industrial production,
    – substantial decline in freight volumes due to a major drop in demand,
    – serious disruption of logistical flows, in particular border controls, entry bans, lack of crew and available infrastructure,
    – dramatic decrease in passenger numbers due to the standstill in tourism.
  • Some transport segments were immediately hit by the crisis and with great strength. This was the case for passenger transport (both river cruises, day trips and ferry services). It also had a quick impact on goods transport segments related to sectors directly impacted by lockdown regulations (e.g. construction, automotive, mobility sectors, etc.) Other IWT segments were affected “with a delay” (e.g. liquid cargo, containers). Some sectors considered as essential for the survival of the economy and the population resisted better to the crisis, but the trends vary significantly from one region to another. As of May 2020, while the IWT volumes have stabilised, they remain at a low level. The economic situation of the sector remains tense. However, it is important to note that the Covid-19 crisis is not the only reason for the declines observed in the IWT sector, which are also explained by seasonable effects and the structural change in the energy sector.
  • For the whole inland navigation sector (goods and passenger transport together), the financial losses for the inland navigation sector are strongly dependent on the length and intensity of the crisis, which currently cannot be predicted. Such turnover losses could be at least 2.2 up to 4.4 billion euros for freight and passenger transport together, according to scenario calculations based on the turnover in IWW goods and passenger transport in the EU.

 

IMPACT OF COVID-19 ON IWT PASSENGER TRANSPORT

River cruise sector

  • The 2019 figures for passenger transport demand revealed that the European river cruise sector was in a healthy state before the Covid-19 pandemic. This is true for both river cruises and day-trip vessels, sectors for which the predictions expected for 2020 were optimistic until the start of the crisis. The crisis is dramatic for the sector, all passenger transport simply being stalled.
  • The Kiel Institute of World Economics assumes a 90% reduction in tourism, sport and entertainment. The Centraal Bureau voor de Rijn en Binnenvaart (CBRB) and BLN Schuttevaer in the Netherlands assumed in their loss estimations a 100% fall in passenger transport on inland waterways in the Netherlands in the first half of 2020.
  • An evolution supporting these assumptions is that in the first half of 2020, according to companies active in the river cruise sector, a drop in turnover of 90% has been recorded as well as liquidity outflow of several tens of millions of euros, while revenues were on a 5% level compared to normal for several companies.
  • A gradual reopening could allow to keep the sector afloat, at least until international cruising is no longer restricted, given that European passengers account for almost 40% of passengers cruising on European waterways.
  • Intra-EU/national passenger transport is expected to start operating again first. This is in line with the proposal of the branch organisation Entreprises fluviales de France (E2F) to reorient river tourism towards national and local tourism in the short-term, since it has been deprived of its international clientele.
  • Indeed, some river cruises resumed sailing on German rivers on 1st June. This is the case for Nicko Cruises which launched the first cruise with its vessel the nickoVISION for a cruise from Straubing in Bavaria along the Danube and Rhine rivers to Dusseldorf. So far, travel bans have meant that the cruises were limited to national tourism, and European river cruise lines anticipate that the restrictions will be further reduced by mid-June. Currently, river cruise lines catering to mostly German and European passengers, including A-Rosa, Phoenix Reisen, Plantours, and Scylla, have also announced plans to resume their trips by the end of June, while CroisiEurope plans a gradual restart from mid-July.
  • In the long run, the prosperity of the passenger sector can however only be ensured if overseas passengers resume travelling on European waterways. Two reasons for this not materialising soon can be identified: they do not want to (because of the health risks) or they are not allowed to (flights are cancelled, strict travel restrictions apply, etc.) Another aggravating factor regarding the river cruise segment is the average age of river cruise passengers. Indeed, river cruises are popular among people over 55 who are also the most at risk from the virus. They are likely to be more reluctant to resume international travel after the crisis, even after the lifting of travel restrictions. According to recent news, the lines that market mostly to international travellers are expecting a later return to service. For example, AmaWaterways has now cancelled its cruises until the end of July, while Viking’s river cruises in Europe are cancelled until the end of August.
  • Expectations are that not only the year 2020 will be heavily impacted but 2021 will also be affected, partly due to vouchers that are issued in 2020 for cruises that were cancelled due to Covid-19 but which will have to be redeemed in 2021.
  • Despite support measures from several European states to avoid bankruptcies in the passenger shipping sector, this may still materialise if bookings (from tourists from overseas as well as from Europe) are not initiated.

 
Day trip excursions

  • In Paris, 61% of all passengers on day trip vessels were foreigners in 2017, while this share was only 54% in 2014. Such indications are also certainly true for many regions in Europe. For instance, in Strasbourg, also a city with many international tourists, the number of passengers decreased by 94% in March for the BATORAMA day-trip company (operated by the Port of Strasbourg). This figure did not reach 100% as some vessels were still navigating at the beginning of March. By the end of May, the BATORAMA day trip tours had restarted, but with a limited number of passengers. On the river Rhône, the number of passengers decreased by 96.4% in March 2020 and by 100% in April 2020 compared to the previous year.

 
Ferry traffic

  • The ferry sector was also seriously hit by the Covid-19 pandemic. The position and market of the ferry sector is noticeably different from the day trip sector. Ferry services play an important role in regional passenger mobility. On the one hand they are part of the inland shipping sector, but on the other hand they should – as “floating bridges” – also be considered as part of the secondary road infrastructure.
  • Ferry services are – as opposed to both the day trip sector and the river cruise sector – part of the vital infrastructure. Therefore, the sector had to continue sailing, but the passenger numbers dropped dramatically: depending on the type of ferry service (utilitarian or touristic) and the type of passengers (commuters, students, other types of vehicles), 60 – 90% fewer passengers were estimated. Where possible, the ferry sector tried to reduce costs by combining connections, reducing sailing frequency in the off-peak hours, or limiting opening hours.

 
Next steps

  • As of today, strong uncertainties still exist as to when passenger transport will relaunch to its usual levels, in particular due to ongoing restrictions in international travel. It is expected that many companies will not survive this financial collapse.
  • How to relaunch the activity in a profitable way while guaranteeing health standards on vessels, thereby rebuilding the confidence of potential passengers, will therefore continue to remain the key questions in the coming months. Indeed, there might be no added value in relaunching the activity if the health restrictions do not make it profitable for the river cruise companies to operate. The sector is actively working on its exit strategy and released guidelines (Source: EBU and IG River Cruise; http://www.ebu-uenf.org/wp-content/uploads/River-Cruise-Minimum-Standard-Covid-19_FINAL-VERSION_1.0_EN.pdf) on 27 May 2020 for minimum standards regarding the resumption of river cruises in Europe after the Covid-19 crisis.

 
 

IMPACT OF COVID-19 ON IWT GOODS TRANSPORT

  • Regarding the goods transport sector, IWT transport volumes and demand have been declining continuously since the beginning of the crisis. The three main segments of goods transport (dry cargo, liquid cargo, containers) are affected differently. Based on the port data already available in April 2020 (compared to the same period in 2019), variations of waterside traffic for main western inland ports vary between -18% and -25% (Swiss Rhine Ports, Lyon, Mannheim, Karlsruhe, Strasbourg, Mulhouse-Rhin). Danube port data for March-April 2020 showed a decrease of 25-35%. Despite this overall decline, a significant level of grain transportation from the ports of the Middle Danube were recorded in March and April 2020. This intensity decreased at the end of April. However, not all ports sustained a decrease in April 2020 compared to April 2019 as a result of the Covid-19 crisis. This is for instance the case of RheinCargo (Neuss, Düsseldorf and Cologne).

 
Dry cargo

  • The dry cargo segment was affected earlier and more strongly than the liquid cargo and container segments and a high decline in transport volumes can be observed, in particular regarding transport of coal, steel, building materials and agricultural products, albeit the existing regional differences. On some occasions, it has been possible for vessel owners operating in particularly affected market segments to switch to the transport of other goods.
  • In France for instance, while the construction sector was particularly affected, some vessel owners were able to transport cereals instead of building materials. In the Rhine area, the demand for the transport of dry cargo has declined significantly, in particular due to declining transhipment volumes in seaports such as Rotterdam. In some areas, an increase is reported, for instance in Germany, for the transport of fertilizers and building materials, especially in the canal areas and on the Danube. In France, the impact of the crisis was stronger at the beginning (a -40% decline in goods transport was reported initially while it currently fluctuates between -3% and -15% depending on the regions).
  •  
    a) Agricultural products, food and foodstuffs

    • In the ports of Strasbourg, Mannheim and Basel, a decline of 10-11% can be observed for agricultural products and cereals in April 2020 compared to April 2019. A strong reduction was also observed in the Swiss Rhine ports in March 2020, mainly explained by the fact that arrivals from China and departures to Asian regions were stopped or delayed.
    • At the large port company RheinCargo (ports of Cologne, Neuss and Düsseldorf), foodstuff traffic witnessed increasing figures.

     
    b) Iron, steel and non-ferrous metals

    • In general, this market segment was affected rapidly by the crisis, particularly due to the closure of industrial sites having recourse to this type of goods. Iron ore, steel, and coking coal account for around 25% of all volumes transported on the Rhine. Available port figures for April 2020 confirm that this segment was strongly affected by the crisis, with drops varying from -30% (e.g. Swiss Rhine ports) to -60% (e.g. Strasbourg). In Germany, IWW steel transport suffered from the decline in automotive industry but some steel work in Berlin/Brandenburg reported an increase in demand for metal products. In the Swiss Rhine ports, the decline in the steel sector was also a direct effect of the confinement measures and the closure of car factories in France and Italy.

     
    c) Sands, stones, gravel and building materials

    • With the closure of main building sites throughout Europe and of relevant production sites (e.g. concrete plants in France), the building material segment was severely impacted, as can be observed from available port data. For instance, the Swiss Rhine ports reported a reduction of 35% in April 2020 for the building material segments compared to 2019.
    • In France, this market experienced a brutal slowdown in March and April with the closure of main building sites. The Haropa ports reported a strong decrease in activities in this segment (while it had been on the rise for several years driven by the Grand Paris Express project). With the decision to gradually re-open those sites in May, transport of building materials is expected to pick up again.
    • RheinCargo reported a reduction for sands, stones and gravel.
    • In the port of Strasbourg, the effects were also severe, with a drop of approximately 30% both in March and April 2020. In Germany, an increase in demand was reported regionally for the building materials industry, especially for cement.

     
    d) Coal

    • The case of coal transport is specific. Indeed, while the Covid-19 crisis led to a significant drop in electricity demand, and therefore on coal transport in countries where electricity production is based on coal (e.g. in Germany), decline in coal transport is also structural as indicated on several occasions in this report. In Germany, according to press reports, the demand for hard coal for electricity generation has fallen by 44 % in Germany in recent months, thereby impacting IWW coal transport (Source: Agora Energiewende “Winterstürme und Corona prägen das erste Quartal in der Stromerzeugung“). In Karlsruhe for instance, coal transport decreased by -80% in April 2020 compared to 2019, although this was also due to the rather low water levels in April 2020. In Mannheim, a decrease of almost 50% was also observed over the same period.

 
Liquid cargo

  • So far, in the liquid cargo segment, the demand for heating oil remained rather stable. However, regarding the transport of fuels and chemical products, drops can be observed, depending on the regions.
  •  
    a) Mineral oil products

    • The transport of mineral oil products is dependent on long-term trends (energy transition), seasonal patterns (winter: heating oil demand, summer: fuel demand), the current spot market oil price and the future market situation (when oil prices are expected to rise this leads to more storage-related transport but when falling oil prices are expected, this leads to less storage). Overall, the demand for heating oil remained stable. As the oil price decreased very quickly in early 2020, for a certain period of time (in March and April 2020) there was some extra transport demand in IWT due to replenishing of strategic oil storage.
    • This also led to oil products being stored in vessels (floating storage), which may make it possible to benefit from rising oil prices in the future. However, when these storage facilities were complete, and as the crisis continued, transport demand dropped due to demand-related factors, in particular due to a reduced mobility in aviation and road transport. Indeed, the Covid-19 effect on this goods segment is due to the almost complete grounding of global aviation and limitations for other transport modes.

     
    b) Chemicals and fertilizers

    • Available port data point to a decrease in the transport of chemicals in April 2020, approaching -17% for the ports of Strasbourg, Mannheim and Basel. In Karlsruhe, a more important reduction (-23%) is observed. In Germany, the low level in demand for the transport of chemical products is due mainly to the production losses in the automotive industry.
    • At the RheinCargo port group, transport volumes for salt (part of chemicals) increased strongly in April 2020, due to special circumstances (installation of new storage facilities).

 
Containers

  • In April and May, containers arrived in reduced volumes in European seaports and from Asia, a trade route on which this container segment is highly dependent. However, the situation varies greatly from one region and from one port to another. In Germany, the effects of the pandemic also resulted in significant volume declines. Such declines can be partly explained by the reduced activity in the automotive industry but also the fashion industry. However, the situation is described by some operators as being currently volatile as some reported that the number of container and ship transfers in the ARA ports has risen noticeably. Indeed, the decrease in container volume depended on the type of product, for example, the automotive industry – and therefore the corresponding container volumes – came to a complete halt, whereas the container volumes for the food industry decreased only slightly.
  • Figures of the RheinCargo port company for April 2020 showed a strong reduction in the waterside traffic of automobiles and machines, in the wake of the standstill of the car production in Germany.
  • In April 2020, the transport of containers remained stable in the Swiss Rhine ports. However, the situation was different regarding transport of empty containers, an essential segment to regulate and ensure that transport between inland and seaports can take place, which recorded some decrease both for imports and exports.
  • In France, the Haropa ports reported that container transport on the Seine decreased by 13.5% and that the Covid-19 effect started to be felt from mid-March onwards. On the river Rhône, container transport (in TEU) decreased by 73.7% in March 2020 and by 27.2% in April 2020 compared to the previous year. For the port of Strasbourg, while an increase in containers was observed in the first quarter of 2020 overall, less containers were handled in March and April 2020 compared to 2019 but only to a limited extent.
  • Looking at the situation worldwide in the maritime sector, container handling volumes in maritime shipping have been declining since February 2020 (compared to figures from the previous years), as can be seen in the Container Throughput Index of the RWI – Leibniz Institute for Economic Research and the Institute for Shipping Economics and Logistics (ISL). Indeed, after the strongest drop ever observed in February 2020, mostly resulting from the situation in Chinese ports at that time, a certain normalisation was observed in China in March 2020 when Chinese ports returned to normal operations as measures to contain the crisis were scaled back. However, a further decline in container handling took place in the rest of the world. In April 2020, a decline was observed in Chinese ports, as containers “left behind” during the crisis were loaded in March 2020. In the ports of other countries, container handling remained at a low as in March.

 
2020 forecast for goods transport

  • Overall, it is difficult to make a forecast for goods transport for the rest of 2020 and anticipate the effects of the crisis on the further economic development of the sector and consumer behaviour. Firstly, this depends on the duration of the corona pandemic (and the possibility of a second wave) at national level but also at European and international level. Secondly, once the virus will have been contained in some parts of the world outside Europe, the economy is expected to pick up again. Relaxation of corona restrictions in many European neighbouring countries is now taking place. It is foreseen that that industry production will resume in many locations pointing to a resumption of transport in several segments.

 
Conclusions

  • For inland navigation, an additional challenge will lie in freight price developments which may severally be impacted as a result of overcapacity, thereby contributing to a further deterioration of the liquidity situation. This overcapacity is mainly caused by the structural decline which the sector is facing, particularly observed for coal transport as a result of the energy transition. However, the Covid-19 is expected to further intensify this trend.
  • In order to cope with the economic consequences of this crisis, support measures of various natures will need to be taken. Four main types of measures can already be identified:
    – Measures to enable inland navigation companies which can still operate to continue their activity. Such measures should allow more flexibility in the application of existing regulations (employment, working conditions, mobility of crew) and enable continuity of navigation (securing opening of inland waterways, operation of infrastructure, good conditions for fuel supply of vessels, access to seaports and major cities, crew members’ access to vessels, etc.)
    – Strong and immediate financial support measures during the crisis, to avoid the bankruptcy of inland navigation companies and to prepare for its aftermath. Coordination in the application and availability of such measures should be ensured, with the support of the EU decision-makers, for the benefit of all IWT companies and the entire fleet in Europe.
    – Creative, large-scale and ambitious measures to restart the inland navigation sector after the crisis. Such support measures should compensate for the loss of activity related to the downsizing of production, revive demand and support industrial production. Measures to rebuild the trust of users, particularly in the passenger sector, will be essential.
    – Communication measures to strengthen the visibility of the inland navigation sector and to highlight its essential nature during and after the crisis.

 
 

LONG-TERM OUTLOOK FOR INLAND WATERWAY FREIGHT TRANSPORT

  • For the present section, different studies and data have been analysed. The study ‘Consequences of large transitions and world trade for IWT 2020-2040’ by Royal HaskoningDHV in December 2019 highlights long-term trends in inland navigation, including greening trends. This study contains the results of desktop research on long-term trends that are relevant for transport demand in IWT. It also contains the results of interviews (held between June and December 2019) with 25 large shippers/consignors in the Netherlands who gave their views on IWT. They were selected as those who are intensively making use of inland navigation for their incoming and outgoing logistics of raw materials and end products.
  • Three other main studies were analysed: the report ‘Shipping in an era of digital transformation’ by the Berenberg Bank and the Hamburg Institute of International Economics from 2018 (Berenberg Bank/HWWI (2018)), the UNCTAD report ‘Review of Maritime Transport 2019’ (UNCTAD (2019)) and the report ‘Mid-term forecast for Germany in spring 2020’ by the Kiel Institute for the World Economy, published in March 2020 (IfW (2020)). Furthermore, empirical data from Eurostat, the World Steel Association, the German Association of Coal importers, national waterway administrations, and the port of Antwerp were collected and analysed.
  • Macroeconomic and industry projections from the Oxford Economics database completed the evidence gained from the literature review. It is worth noting that these projections are based on studies and a database that pre-date the start of the Covid-19 pandemic. Forecasted point estimates might thus be influenced, but longer-term trends are expected to remain valid, as the impact of the pandemic should operate in the same direction as these trends. This is the case for the trend of a regionalisation of production and logistics chains, which already started after the financial crisis, and which is expected to be amplified by the Covid-19 pandemic.
  •  
    a) Agricultural products

    • Outlook in brief: less large-scale production, more local production and less long-distance transport of agricultural goods are foreseen. The number of smaller vessels will continue to decrease, but there are options to cope with this, either by investing in own small vessels or by using small vessels belonging to corporations.
    • An empirical analysis of harvest results and inland waterway transport of agricultural products showed a strong correlation between both variables. In Germany, IWW transport of agricultural products increased between 2008 and 2014 but fell afterwards and stabilised somewhat in 2019. Variations in harvest results are a major explanation for this evolution.
    • For France, a long-term correlation between harvest results and inland waterway transport was found. The year 2019 saw the third highest harvest result in France since 1990 and the second highest transport volume of agricultural products on French inland waterways since 1990.
    •  

      FIGURE 1: HARVEST VOLUMES IN FRANCE AND TRANSPORT OF AGRICULTURAL PRODUCTS ON FRENCH INLAND WATERWAYS (1990-2019) INCLUDING TREND LINE


      Source: CCNR analysis based on Eurostat data [iww_go_atygo] and [apro_cpsh1].
      Crops Code 1,000 = Cereals including all kinds of wheat, spelt, rye, barley, oats.

       

    • Long-term forecasts for the monetised output in the agricultural sector (at constant prices of 2015) in the period 2020-2030 point out a yearly growth rate of 0.61% in France, 1.05% in the Netherlands, 0.66% in Hungary, but a yearly decrease of 0.59% in Germany (Source: Oxford Economics).
    • According to the interviews of large shipping companies within the study realised by Royal HaskoningDHV, IWT is a preferred mode of transport for long distance transport of agricultural and food products. However, the period 2020-2030 is seen as a transition period for agriculture.
    • A tendency for less large-scale production and more local or regional small-scale production is assumed. This tendency could lead to less long-distance transport of agricultural products and foodstuff products. Another trend which could negatively affect the volumes of agricultural products on inland waterways is the reduction in the number of small vessels, as grain is carried by small vessels in particular. Shipping companies see four options to ship small volumes of cargo (Source Topsector Logistics / RoyalHaskoningDHV (2019), Gevolgen grote transities en wereldhandel voor de binnenvaart 2020-2040):
      1) acquisition of their own small pushed barges and using them in combination with a push boat,
      2) contracts with inland waterway cooperatives that have a minimum number of small vessels,
      3) reverse modal shift: use trucks instead of small vessels,
      4) change in logistical patterns.
    • Shippers have already made use of options 1 and 2 and their experience was overall very positive. Until now there has been no reverse modal shift but this could be expected for the future.

     
    b) Foodstuffs and food products

    • Outlook In brief: for western Europe, a reduction in foodstuff production due to less livestock activities, and more local, decentralised food production is foreseen. This reduces mass cargo transport over long distances. A shift of foodstuff production from western to eastern Europe and a change from an Atlantic trading route to an eastern European trading route for oilseeds is expected. The Danube could become more important for these cargo streams, while the ARA-Rhine region would lose volumes.
    • Worldwide growth of population leads to more demand for agricultural products, food and foodstuffs. But it is supposed that the largest part of this growth will take place in developing countries. Societies in western Europe are becoming more conscious of the sustainability of food products and logistical chains and aim to avoid emissions from long-distance transport.
    • For western European countries, it is expected that the following trends will have an impact on food and foodstuff production as well as on livestock activity in the next two decades:
      – more local, sustainable, small-scale and decentralised production of food for human beings,
      – less multi-stage logistical chains in the food sector: multi-stage production and transport around the world will be avoided,
      – more end production taking place where the raw materials and the end consumer are located,
      – more transparency about where food comes from, how it is produced, how it is transported, and which emissions are caused by its transportation and in what volumes,
      – the spread of diseases leads to more resistance towards large-scale production in the population.
    • Large volumes of oilseeds and raw materials in the foodstuff market are currently imported via Dutch seaports from South America and Asia. Experts from large shipping companies expect that they will be partially substituted by similar commodity streams coming from middle and eastern Europe. Although inland navigation would probably be involved in this second case, the geographical focus of cargo streams could change, and a shift from the ARA-Rhine axis to the Rhine-Main-Danube axis would be associated.
    • An evolution that is pointing to the same geographical shift (west to east) is the expectation of large shipping companies from the food and foodstuff sector that a delocalisation of livestock activities from the Netherlands to Poland (poultry breeding), Hungary and Romania will take place in the future. The reason is that the Netherlands struggle with increasing nitrogen emissions from agriculture and livestock activities. The sector is also confronted with closures or mergers of foodstuff companies.

     
    c) Iron ores, steel and metals

    • Outlook in brief: transport of metals will remain important in Europe, due to export flows of European high-quality steel to growing markets overseas. For iron ore, the transport demand outlook for western Europe is more or less negative, due to a higher recycling rate of steel, environmental pressures to reduce emissions and change steel manufacturing, and a higher degree of saturation in steel demand. In eastern Europe, steel demand is less saturated, and steel production and iron ore are supposed to achieve relatively high absolute growth due to catching-up mechanisms in economic development.
    • There are currently two main technologies in steel production. Oxygen steel production makes use of iron ores and has a market share of 70% in Germany, 69% in France, 69% in Romania, and 91% in Austria. The second major technology uses electric furnaces, by which scrap is melted and transformed to new steel in a recycling process. This technology has a market share of 30% in Germany, 31% in France, 31% in Romania and 9% in Austria (Source. World Steel Association (2019), Steel Statistical Yearbook).
    • In the wake of a larger role of the circular economy in the future, recycling of metals and steel (scrap or metal waste) could be an important part of European steel making in the future. The interviews with Dutch shipping companies reflected pronounced expectations of a higher recycling rate of metals and steel and a decreasing tendency in steel demand and steel production in western Europe.
    • The impact of this trend on the transport of iron ore and metals is different. For metals, the outlook is better than for iron ore, as the demand for high quality steel is increasing in developing countries, giving western Europe new export markets, also in times of a saturated inland consumption of steel. However, iron ore transport will be reduced by more recycling of steel, less emission intensive production technologies, and also by less steel demand in western Europe.
    • Based on an empirical analysis, the following figure shows the relation between GDP per capita and steel demand per capita for 27 European countries and the EU in total. Countries with a higher GDP per capita have, in general, also a higher steel demand per capita (steel production plus imports minus exports, per capita) (Steel demand per capita, as defined by the World Steel Association, is derived from apparent steel use. Apparent steel use is defined as production plus net imports minus net exports and is commonly used to measure steel demand).
    • The curve reflects a certain saturation of steel demand in highly developed countries in northern and western Europe. It also shows a low level of steel demand in eastern European countries so far, but the potential of a strong increase in the wake of economic growth and development.
    •  

      FIGURE 2: GDP PER CAPITA AND STEEL DEMAND PER CAPITA


      Source: CCNR analysis based on data from Eurostat [nama_10_pc] and World Steel Association
       

    • Countries in western and northern Europe are located on flat segments of the curve, meaning that a rise in GDP per capita would lead to a limited increase in steel demand, compared to countries in the middle and lower Danube region (Bulgaria, Romania, Serbia), located on steep segments of the curve, where a rise in GDP per capita would lead to more absolute growth in steel demand.

     
    d) Sands, stones, gravel and building materials

    • Outlook in brief: the outlook is positive, in particular in western Europe. Growth of transport will be based on existing materials, in parallel with demographic growth and the increase of activity in the housing market. A concentration on larger waterways is likely. Untapped potentials lay in urban inland waterway transport of construction materials, by avoiding negative external effects of road transport.
    • Shippers think that inland vessels will remain the preferred transport mode for the delivery of all kinds of sands, stones, gravel and building materials. They do not expect any major modal shift which would reduce the market share of water transport in this business. However, a consolidation process is taking place. Larger entities are being created, by acquisitions, so that scale effects will play a role in the future. The number of small concrete mortar plants as well as sand and gravel companies located along small waterways are expected to be reduced.
    • Larger entities located alongside the main inland waterways are formed. This leads to less demand for smaller vessels. However, long-distance transport of sands, stones and building materials is not endangered, as sand and gravel companies (larger ones) will remain to be located alongside inland waterways. In the coming years, large volumes of sand and gravel are expected to come on the market as a result of dredging, in order to give more space to rivers, and there is a great need of materials for dike reinforcement.
    • According to projections from Oxford Economics, the output in the construction sector will grow from 2020 until 2030 by a yearly average rate of 1.4% in France and 1.1% in Belgium, Germany and the Netherlands. For countries in eastern Europe, demographic projections – which are an important baseline for the future construction output – are less positive than for western Europe. The size of the population in Poland is expected to be 2.4% smaller by the end of this decade than in 2019, and for Romania, a drop of 8.5% is projected. For France, a growth of 3.4% is foreseen, for Germany +1.1%, for Belgium +4.7% and for the Netherlands +5.8% (Source: Oxford Economics).
    • Urban inland waterway transport in congested areas, where IWT can contribute to a more sustainable building materials logistics, has a fundamental growth potential. At present, this potential is by far not sufficiently exploited, as inland navigation is not sufficiently known as an alternative by many players in this field.

     
    e) Coal

    • Outlook in brief: strong reduction of coal transport in western Europe in the coming 20 years, but at least stabilisation, if not growth of volumes in eastern Europe.
    • Coal volumes will decrease strongly in the next two decades, as many countries have decided to close coal fired power plants, in line with the aim to fight climate change. Germany, for example, will close its coal fired power plants gradually from 2022 onwards, until all plants shall be closed by 2038. According to figures from the German Association of Coal Importers, electricity generation accounted for 59.3% of all coal consumption in Germany in 2018 and steel production for 39.3% (the rest being used for heating energy).
    • Although world trade of coal increased in 2019 by 0.7% to 1.22 billion tonnes, German hard coal imports (all transport modes) have fallen significantly in 2019 by around 15% or 7 million tonnes. Electricity generation from hard coal even fell by 31%. Within only three years it has approximately halved to about 57 terawatt hours (TWh). In France, coal demand has also fallen substantially in recent years and is expected to also fall in the next decade. For Bulgaria and Romania, a rising coal demand is expected based on Oxford Economics forecasts. This result is similar to the findings about steel demand and iron ore transport in eastern Europe.

     
    f) Chemicals and mineral oil products

    • Outlook in brief: it is assumed that mineral oil products will be part of a propulsion mix in the next two decades, together with batteries, biofuels and other propulsion systems. However, there are no major growth prospects for mineral oil products and a gradual decline is assumed. For chemicals, the outlook is far more growth-orientated, and IWT is the preferred mode of transport for the chemical industry.
    • Clients of the chemical industry exist in various economic sectors, especially in the agricultural sector (fertilizers), the plastics, automotive, construction and paper and pulp industries. Expert interviews determined that the strong position of IWT for chemicals shall be kept. Other modes of transport are not viewed as a viable alternative to inland navigation, except for pipelines. The forecast for chemical production in the EU points to a 1.1% average annual growth rate over the next decade.
    • It is worth clarifying that mineral oil products can be considered as fuel or cargo in the transport sector.
    •  

      TABLE 1: : OIL PRODUCTS USED AS A FUEL OR CARGO ACCORDING TO THE BRANCH OF THE TRANSPORT SECTOR CONCERNED

      Rail transport in Europe today is mostly electrified, but diesel is still used as a fuel in some parts of the network.

      Product nameUsed as fuelUsed as cargo
      Gasoline, DieselRoadLong-distance transports of fuel are mainly executed by maritime and inland vessels, pipelines or railways. Short distance transports are often done by trucks, e.g. for transports of gasoline and diesel between storage depots and gasoline stations.
      GasoilIWTSee the first line
      Heavy fuel oilMaritimeSee the first line
      KeroseneAviationSee the first line

      Source: CCNR
       

    • When considering oil products as a cargo, inland vessels have a significant modal split share, generally above the average in IWT. For instance, the modal share of IWT (within transport performance by rail, IWT and road) for refined petroleum products is 91 % in the Netherlands and 35 % in Germany.
    • In the wake of the energy transition, demand for oil products has decreased and will decrease further. It will impact inland waterway transport of oil products. It is assumed that oil products will be part of a propulsion mix in the next two decades, together with batteries, biofuels and other systems and will gradually be substituted by other energy sources. However, there are currently financial and technical limitations to the deployment of carbon neutral technologies, preventing their full-scale deployment. Several scenarios towards zero emission in the IWT sector are currently under study. As data from the port of Antwerp show, mineral oil products have recorded losses since 2013, while chemicals have gained large volumes.
    •  

      FIGURE 3: INLAND WATERWAY TRANSPORT OF THE PORT OF ANTWERP FOR CHEMICALS AND MINERAL OIL PRODUCTS (IN MILLION TONNES)


      Source: Port of Antwerp
       
       
      g) Containers

      • Outlook in brief: world trade and maritime container transport have slowed down significantly since the financial crisis 2009 and are presumed to slow down further. There are tendencies to more regional logistic and production chains. IWW container transport will be influenced by this slowdown, as it is strongly linked with maritime trade.
      • The strong transport demand in worldwide container shipping which started in the 1990s and accelerated in the 2000s emanated from the deepening of the international division of labour. However, down from a long-term growth trend of 5.8% per year during the past two decades, global containerised trade increased by only 2.6% in 2018 and is estimated to have grown by 3.2% in 2019 (See: UNCTAD (2019)). The annual growth rate between 2019 and 2024 is expected to be even lower, not only due to the Covid-19 pandemic but also due to a general slowdown in international trade.
      • As was already the case before the Covid-19 crisis, international trade has stopped accelerating and even started decelerating and its importance relative to GDP has decreased since the financial crisis of 2008/2009. This led to the fact that, according to the McKinsey Global Institute (2019), the share of exports in gross output in goods-producing value chains decreased from 28.1% to 22.5% between 2007 and 2017, indicating a declining trade intensity of value chains. As analysed by UNCTAD (2019), the drivers of this development might be profound structural forces, including a decreased growth of vertical specialisation and the global fragmentation of production, a structural change away from investment goods to the less trade-intensive categories government and consumer spending, and an increasing shift of global consumer demand away from tradeable goods to services.
      • The described trends are only strengthened by the present protectionist tendencies and impacts of the Cov-19 pandemic so that a regionalisation and a partial de-globalisation seem likely to happen (See: Berenberg Bank/HWWI (2018), McKinsey Global Institute (2019), and UNCTAD (2019)). As the Kiel Institute emphasises: “At present, the Corona crisis is drastically highlighting the risks associated with wide-spread global supply chains trimmed for cost efficiency and the avoidance of redundancies in the value-added networks” (Kiel Institute for the World Economy (2020)).
      • Environmental aspects play a certain role too. An increase in maritime transport costs due to more strict environmental regulations could have effects on maritime freight transport. An example is the regulation imposed by the International Maritime Organization (IMO) on 1 January 2020, that requires a worldwide sulphur cap of 0.5% on fuel content. This could increase costs of maritime and world trade and contribute to more regional production and logistic chains (See: Berenberg Bank/HWWI (2018) and UNCTAD (2019)).
      • For container transport on inland waterways, these trends are also relevant as inland container barging is heavily linked to maritime container transport.

       
      h) Summary

      TABLE 2: TRADITIONAL CARGO SEGMENTS

      SegmentPotentialMost important driving factorsLong-term trend for IWT
      Chemicals++High degree of innovation of the chemical industry in EuropeIWT remains the preferred transport mode for chemicals
      Containers0/+Reduction of growth rates in world trade and maritime shippingGrowth continues but with lower rates
      Sand, stones, building material+IWT is a preferred mode of transport for shipping companies and growth in the construction sector will be positive in western Europe (WE)Moderate growth on existing long-distance routes, higher potential for growth in urban areas
      Metals and metal products0/+Economic growth in emerging markets leads to more demand for steel Metals and steel transport can grow on a limited basis
      Mineral oil products0/-Mineral oil products are still needed as a fuel in the next decade, but a gradual decline is already underwayGradual decline in most regions but positive exceptions are possible
      FoodstuffsWE*: 0/-
      EE: 0/+
      Decrease of livestock activities in western Europe due to nitrogen and other emissions, delocalisation of parts of these activities to eastern Europe (EE)Decrease in foodstuff transport due to less livestock activity in WE. For EE, a more stable or even positive evolution is expected
      Iron oreWE: -
      EE: +
      WE) A certain saturation in steel demand and less iron ore intensity in steel production
      EE) Stronger growth potential in steel demand
      Iron ore transport is expected to decrease in WE while it is thought to increase for a certain period in EE
      CoalWE: -
      EE: 0/+
      Phasing out of coal in the energy sector and gradual decline of coal use in the steel industryDecrease in coal transport in WE, at least stagnation in EE

      *WE = western Europe; EE = eastern Europe
       

      TABLE 3: NEW CARGO SEGMENTS

      SegmentPotentialMost important driving factorsLong-term trend for IWT
      Project cargo, heavy and oversize cargo+Energy transition (windmills), electricity demand (transformers), bottlenecks for transporting this type of cargo by other modes of transportIWT benefits from its large space capacities for project cargo, heavy and oversized cargo and its flexibility
      Recycling, circular economy +Industrial production is transformed by the need for a large-scale reduction of emissionsIWT is already active in the transport of recycling material and is expected to increase this activity
      Biomass +Energy transition, need for more biofuel, compensation for reduction in foodstuff productionIWT has large capacities for transporting these materials
      Hydrogen,
      batteries
      +In the future energy system, hydrogen can be an important element, possibly in combination with electricity and batteriesTrend is still at the beginning, transport possibly by pipeline or by containers on maritime ships and inland vessels (or by a combination of these modes). Large potential from 2030 onwards

      Source: CCNR, Royal HaskoningDHV

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