• The iron ore and steel segments experienced a decrease in both Rhine and Danube countries in 2022. The effects of the war, inflation and supply-chain related disruptions are expected to continue in 2023 and will lead to persisting uncertainty. A rebound is foreseen in 2024.
• Regarding the 2022/23 harvest season, on the one hand, wheat and barley harvest volumes are expected to increase, whereas on the other hand, maize harvest volumes are foreseen to contract, compared to the previous year.
• In light of the uncertain geopolitical environment and the deteriorated economic conditions, prospects remain bleak for the chemical industry in 2023. Production and demand are expected to decline as a result of lack of orders, disrupted supply chains and high energy costs.
• The demand for river cruises is expected to return to pre-pandemic levels in 2023. However, it remains uncertain to which extent factors such as rising energy and fuel prices, difficulties in recruiting staff and inflation will impact the new building activity.
- Inland waterway transport in its present structure relies on traditional market segments. Examples are the steel, agricultural, chemical and food segments.
- On the entire Rhine, around 20% of all cargo transport is related to steel production in 2022 (iron ore, scrap steel, coking coal, metals, metal products). On the Danube, this share is even higher and amounts to 40% for the Middle Danube.
- Iron ore transport on the Rhine in general follows the trend in steel production. Steel production in Rhine countries decreased by -7.9% in 2022 compared to 2021. Transport of iron ore on the entire Rhine decreased by -2.8% in 2022.
- Steel production in Danube countries61 amounted to 18.1 million tonnes in 2022, a decrease of -12% compared to 2021. Transport of iron ore in Lower Danube countries decreased by -4.4% in 2022.
- According to Eurofer,62 the second quarter of 2022 – taking into account the global geopolitical context, the war-related disruptions, weaker demand and the rise in energy prices and production costs – saw a rapid end to the positive post-Covid trend which had prevailed for the steel market until the first quarter of 2022. Hence, in 2022, steel demand experienced its third recession in four years. This is expected to continue in 2023, but at a lower rate. The steel outlook for 2024 is more favourable and steel demand is expected to rebound.
- Despite the above-mentioned difficult conditions, production growth of steel-using sectors was still observed in 2022. It is expected to slow down in 2023 (+0.3%)63 and to pick up some speed again in 2024 (+2.3%) thanks to improved economic confidence and recovery in the industrial cycle. The automotive sector will be the only exception as growth is expected to continue moderately in 2023 and a drop in output is foreseen for 2024 (-1.8%).
- The World Steel Association, in its short-range outlook dating from May 2023,64 foresees similar trends as Eurofer, with a tendency to more pronounced changes. A slight decline in steel demand within the European Union and the UK (-0.4%) is expected in 2023 due to the lasting effect of the war, as well as due to inflation and supply-chain related disruptions. A rebound of +5.6% is foreseen in 2024 as it is assumed that the afore-mentioned effects will dissipate. However, the outlook is subject to persisting uncertainty.
- Agricultural and food products have a share of around 10% in Rhine navigation and around 23% in Danube navigation. In general, agricultural transport on inland waterways in one specific year is partly determined by harvest results in the previous year.
- The war disrupted the Ukrainian and Russian grain exports, mainly due to the closure of Ukrainian ports on the Black Sea, and sanctions imposed on Russia. The increase in prices for agricultural commodities that followed lasted until the end of July 2022. In August 2022, the Black Sea ports were reopened. The supply shortage disappeared, bringing prices down to their pre-crisis levels. Until the end of 2022, maize and barley prices remained on this pre-crisis level, while wheat prices continued a downward trend.65
For the 2022/23 harvest season66 of soft wheat, an increase is foreseen on a worldwide scale, as well as for the EU-27. For France, as the most important producing country in the EU-27, volumes are expected to be slightly lower than the 5-year-average. For the following season 2023/24, soft wheat harvest volumes are expected to rise further, to reach 787 million tonnes. The growth is supposed to come from Russian, Ukrainian and US-American regions.67 For hard wheat, the 2022/23 harvest season produced 33 million tonnes, which is a 5% higher result than in the previous season.
Exports of soft wheat (grain and flour) from the European Union are expected to increase in the 2022/23 harvest season by +7% compared to 2021/22 and by +11% compared to 2020/21. The main destinations of these exports are countries in northern Africa such as Morocco, Algeria and Egypt.68 Grain is, in particular, exported from ports in northern France to these countries, and inland vessels are used to deliver the grain from the hinterland to the seaports. The river-sea Port of Rouen is the largest export harbour for grain in Europe.
Worldwide production is foreseen to increase by +3% in the 2022/23 season, to 154 million tonnes. The prices for European barley have decreased, which strengthened the competitive position of European barley compared to Russian barley.
Harvest results are expected to contract by -6% in the 2022/23 season compared to the previous one. A strong reduction for maize exports from Argentina is the main contributing factor, the reason being the low harvest volumes in Argentina. Maize exports from the US are also expected to decrease.
- On the demand side, the forecasts for wheat consumption have been revised downwards due to the economic situation in 2023. This downward revision is made for all kinds of wheat consumption (human, industrial and animal consumption).
- In 2022, the main macroeconomic indicators influencing the chemical sector were mostly linked with the aftermaths of the armed conflict between Russia and Ukraine: global inflation, weakening of GDP growth, falling consumer confidence, oil price volatility impacting the financials of several global chemical producers, high gas price, bottlenecks in the supply of feedstock and high prices affecting the entire chemical value chain, extreme weather events (low waters) affecting transport of chemicals and leading to further economic disruption.69
- The share of chemicals transported on the entire Rhine amounts to approximately 17% and 11% on the Danube. The transport performance for chemicals in Rhine countries has remained at somewhat stable levels over the last five years, with significant drops in 2018 (low water effect) and 2022 (as a consequence of the war in Ukraine and the low waters).
- In Rhine countries, production of chemical products followed the upward movement of the business cycle until 2018. In 2019 and 2020, it came under pressure from various trade barriers and the Covid-19 pandemic. In 2021, chemical production recovered in a rebound effect. It then sustained a sharp decrease in 2022 in all Rhine countries, due to the price surges for its petrochemical input factors. Indeed, the chemicals sector is resource-intensive and the largest energy consumer in Europe.
- The volumes of chemicals transported along the Danube, albeit on a lower level, follow a rather positive trend, with, like in Rhine countries, some decreases in 2018 and 2022. In 2022, chemical production in Romania and Hungary decreased, while it remained stable in Austria and even increased in Bulgaria.
- Given that 88% of all chemical products in the EU are produced in eight countries, of which four are Rhine countries (Germany, the largest producer, followed by France, the Netherlands and Belgium), the development of the chemical sector in Rhine countries strongly influences the EU chemical sector. Overall, in 2022, chemical production in the EU declined by -6.2% compared to 2021. The last comparable slump in production was in 2009 in the wake of the global economic crisis (-12.1% compared to 2008). The chemical sector is the manufacturing sector whose production growth reduced the most compared to 2021, in a context where the production growth of manufacturing sectors increased overall by +2.2% in 2022 (compared to 2021).70
- In light of the uncertain geopolitical environment and the deterioration in economic conditions, prospects remain bleak for the chemical industry in 2023. Unlike the Covid-19 pandemic or the 2009 global economic crisis post-periods, no powerful or rapid recovery is expected. A precise forecast is however difficult to establish due to the volatile underlying conditions which the armed conflict between Russia and Ukraine and the resulting energy crisis represent. In particular, the trend in industrial weakness is expected to continue during the year 2023. A further decrease in chemical production in Germany is expected, according to the Association of the German Chemical Industry (VCI).71 However, the economic recovery in China and the gradual decrease of energy prices are expected to support the recovery of the European economy in the mid-term. The challenges for the industry are therefore expected to remain significant in 2023 in the form of reduced demand for chemical products resulting from lack of orders, disrupted supply chains and high energy costs.
- The current regulatory and financial framework also plays against the competitivity of the chemical industry in Europe, particularly when comparing the European competitive framework with regions where energy prices are more favourable than in the EU, which is an additional challenge.
- In the longer term, other parameters linked with the restructuring of the chemical industry in general might also affect inland waterway transport. In fact, the disruption of 2022 has highlighted supply chain vulnerabilities in this industry. This might lead to a reorientation of the industry’s main production regions and sales channels or to the search for new sources of raw materials. In addition, regulatory issues and environmental concerns might also drive the transformation of this sector, particularly regarding the use and the transport of alternative feedstocks for the production of chemicals and final products.
- The new building activity for river cruises in Europe is expected to remain low in 2023. While the capacity of vessels leaving the fleet has been far below the added capacity in the last decades, leading to a continuous increase of the European river cruise fleet bed capacity, an additional capacity of only 100 beds is estimated compared to 2022. This is explained by the higher number of withdrawals foreseen compared to the number of new buildings entering the river cruise market. This would seem to be linked to the fact that some river cruise vessels are being permanently turned into floating hotels in order to host Ukrainian refugees in the context of the ongoing conflict.
- The river cruise branch is optimistic that the demand for river cruises should return to pre-pandemic levels in 2023. This might encourage future investment in the newbuilding activity. Managers of inland waterway tourism companies remain optimistic but also indicate that they face several concerns that could delay their investments: rising energy and fuel prices, difficulties in recruiting staff, inflation and rising prices of raw materials, difficulties for the supplies and the procurement of the latter. Thus, despite their will to invest in the forthcoming 12 months, it remains uncertain to what extent the new building activity will be impacted by the above-mentioned factors in the near future.72
IRON ORE AND STEEL SEGMENT
FIGURES 1 AND 2: STEEL PRODUCTION IN RHINE COUNTRIES AND TRANSPORT OF IRON ORE ON THE ENTIRE RHINE (IN MILLION TONNES)
Sources: World Steel Association, Eurofer, Destatis, Rijkswaterstaat, CCNR analysis
FIGURES 3 AND 4: STEEL PRODUCTION IN DANUBE COUNTRIES AND TRANSPORT OF IRON ORE ON THE LOWER DANUBE (IN MILLION TONNES)
Sources: World Steel Association, Eurostat [iww_go_atygo]
* Lower Danube = Romania and Bulgaria
Data for Middle Danube countries were mostly missing.
OUTLOOK FOR THE IRON ORE AND STEEL SEGMENT
AGRICULTURAL AND FOOD PRODUCTS
FIGURES 5 AND 6: GRAIN HARVEST PRODUCTION AND TRANSPORT OF AGRICULTURAL PRODUCTS IN RHINE COUNTRIES (IN MILLION TONNES)
Source: Eurostat [apro_cpsh1] and [iww_go_atygo]
FIGURES 7 AND 8: GRAIN HARVEST PRODUCTION AND TRANSPORT OF AGRICULTURAL PRODUCTS IN DANUBE COUNTRIES (IN MILLION TONNES)
Source: Eurostat [apro_cpsh1] and [iww_go_atygo]
OUTLOOK FOR THE AGRI-FOOD SEGMENT
TABLE 1: HARVEST VOLUMES IN THE SEASON 2022/23 COMPARED TO 5-YEAR-AVERAGE
|Harvest season 2022/23 in million tonnes||World||EU-27||France|
Sources: FranceAgriMer mai 2023, Banque CIC agriculture, European Commission, Service de la statistique et de la prospective (SSP) du Ministère de l’agriculture et de l’alimentation (France)
FIGURES 9, 10, 11 AND 12: INDEX OF CHEMICAL PRODUCTION AND TRANSPORT OF CHEMICAL PRODUCTS IN RHINE AND DANUBE COUNTRIES
Source: Eurostat [STS_INPR_A], [IWW_GO_ATYGO]
OUTLOOK FOR THE CHEMICAL SEGMENT