INTRODUCTION

  • In partnership with the European Commission, the Central Commission for the Navigation of the Rhine (CCNR) carries out regular market observation reports on the development of inland navigation transport in Europe. Its publications consist of annual, semestrial and thematic reports. In the context of its market observation activities, the CCNR organised a thematic workshop on the topic “Price formation in inland waterway transport” on 8th November 2023.

 

PURPOSE OF THE WORKSHOP

  • The workshop had several objectives:
    – to understand how price is formed and identify the different schemes of price formation in inland navigation freight transport (IWT);
    – to look into evolution of freight rates over time;
    – to address the different factors influencing price formation (supply and demand, water levels, market structure, type of contracting, etc.);
    – to assess the impacts of price formation schemes on the IWT sector and its performance;
    – to discuss the possible trends that might affect such schemes in the future and how they might have an impact on the competitivity of IWT;
    – to support policy makers in assessing the impact of their policies on IWT prices.

PARTICIPANTS

  • The views of a wide range of IWT actors were sought: inland vessel operators, cargo owners, multimodal operators, policy makers, freight forwarders, brokers, cooperatives, banks, institutes publishing information about freight rates, ports, consultants.

 

PRICE FORMATION MODELS IN IWT

MAIN INFLUENCING FACTORS

  • There are several influencing factors to price formation in IWT. During the workshop, it was specified that price formation was first and foremost a matter of supply and demand. From the perspective of the supply side, the new building rate, and the total fleet’s loading capacity were the factors that were highlighted, whereas on the demand side, the transport demand per cargo segment appeared as an important influencing factor. Within the scope of main influencing factors on price formation in IWT, market structure, water levels and operating costs (such as fuel/energy or staff costs) were also highlighted. Other factors such as type of vessel, quality of vessel, special vessel requirements, origin and destination of the voyage, duration of the voyage and waiting times (for instance in ports during loading and unloading processes), type of cargo, value of the cargo and quantity, expected empty sailing time, and rate of inflation, were also pointed out (non-exhaustive list).
  • Some external factors that impact the freight rates were also addressed, such as Covid-19, economic and geopolitical conditions, as well as regulatory factors.
  • It was emphasised that the number of vessels and the available loading capacity is fixed in the short term. Yet, in some cases, the availability of barge capacity can change. An example is the transfer of vessel capacity from the Rhine to the Danube region (3% of Rhine dry cargo fleet capacity) in the context of the Solidarity Lanes which contributed to reducing the Rhine fleet and its loading capacity, and therefore impacted the container and dry bulk freight rates (upward movement).
  • On the other hand, demand can fluctuate strongly, as the boom in coal transport in 2022 and its impact on dry bulk freight rates has shown. Similarly, for the liquid bulk segment, fluctuation in availability of energy products or the shutdown of a large refinery can have a strong impact. Strong variation in transport prices can also occur during periods of low water and periods of rapidly changing demand conditions (for example during the outbreak of an economic crisis).
  • Within tanker shipping, the oil price dynamics play an important role for transport demand and therefore also for transport prices. Also, the term structure of the oil price on the futures market (reflecting expectations on how the oil price will evolve in the future) is an influencing factor for transport prices in tanker shipping. The term structure can be characterised by higher prices for deliveries in the future compared to actual spot market prices (a situation known as ‘contango’). In this case, more liquid cargo will be transported to storage facilities, due to the expectation of selling oil products in the future at a higher price. The result of this contango situation is an upward movement of freight rates. The opposite of contango is backwardation (lower prices for the delivery of oil products in the future compared to actual prices).
  •  

    FIGURE 1: EXAMPLE – TANKER BARGE FREIGHT RATES VERSUS MAIN INFLUENCING FACTORS


    Source: Insights Global
     

  • An example of how operating costs influence freight rates is shown in the following two charts. Operating costs are hereby measured by the journey time of a trip. An analysis of CITBO spot market freight rate data shows that the journey time in hours is an indication for the length of a trip and related costs. The longer the trip, the higher the costs and the higher the freight rate level.
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    FIGURE 2: FREIGHT RATES ARE INFLUENCED BY OPERATING COSTS – MEASURED BY JOURNEY TIME


    Source: CCNR analysis based on CITBO data
     

  • When the amount of cargo that is available on the market is low, vessels continue sailing at very low prices because those prices are mostly still higher than the variable costs (such as fuel). When the amount of cargo is high, transport capacity can only increase to a certain extent, as the supply side is more-or-less fixed. The prices therefore rise until clients (cargo owners) choose other options.
  • The strong impact of water levels on freight rates was highlighted by all speakers during the workshop. As shown in Figure 3, the impact of water levels on freight rates has become even more acute in recent years. In addition, Figures 4 and 5 show the high volatility of water level surcharges on container transport, making it difficult for transport and logistics providers to anticipate their impacts on the IWT freight rates. This can ultimately influence modal choice.
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    FIGURE 3: RELATIONSHIP BETWEEN WATER LEVELS AND FREIGHT RATES


    Sources: CCNR analysis based on data from Insights Global and the German Waterway Administration/Federal Office for Hydrology.
    * Prices on the spot market for liquid cargo (gasoil) transport ARA-Rhine

     

    FIGURES 4 AND 5: VOLATILITY (UP) AND DURATION (DOWN) OF LOW WATER SURCHARGES OVER TIME



    Source: Haeger& Schmidt Logistics, Division Intermodal

 

GENERAL MARKET STRUCTURE

  • There are six main goods segments in the WT sector. Within dry bulk, the segments of agricultural and food products, raw building materials, metals, coal and ores are found. Within liquid bulk, oil products and chemicals are mainly found. The third type of cargo is dedicated to containers.
  • Five main types of contracts to operate in IWT were highlighted during the workshop: spot market, time charters, voyage charters, long-term contracts and internal contracts (transport for own account). Spot market is the first contract option for the dry bulk market segment while time charter is the preferred option for liquid bulk and container markets. Price formation is directly driven by those different types of contracts. For instance, in the spot market, there are high earning possibilities during boom times to be balanced with high volatility in income and therefore less stability. On the other hand, time-charter and long-term contracts enable income to be more predictable and more stable, therefore being more attractive for bank financing.
  • The IWT sector is generally composed of the primary and secondary markets. The first market is mainly composed of shippers, brokers, shipping lines and cooperatives, while the second market is composed of vessel owners, including the number of available vessels to transport the cargo. In western Europe there are mainly small vessel owners, particularly in the dry bulk sector. Large companies exist in the liquid and container sectors. In the Danube region, the company structure is different, dominated by a few large companies which operate mainly in the dry bulk sector, whereas in western Europe this is the case to a lesser extent in the liquid bulk sector.
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    FIGURE 6: MARKET STRUCTURE IN THE IWT SECTOR


    Source: Platina2, D1.5 ‘Strategy to enhance market transparency and synergistic actions’, 2015
     

  • In western Europe, there are a high number of owner-operators (operational functions at vessel level). Only a very limited number of vessel owners manage the functions at the upper levels themselves such as sales, marketing and drawing up contracts directly with cargo owners. The brokers operate at fleet level, connecting the cargo owners, often represented by large forwarding companies with the highly fragmented level of the vessel owners/operators, mainly consisting of small family companies owning only one or a few vessels.
  • Depending on the cargo segment, the way transport assignments are acquired varies. This also plays a role in price formation, particularly whether intermediaries play a role or not in the contract negotiations. For instance, in the liquid and container segment, transport operators rely mostly on one operator while in the dry bulk sector, transport operators rely more on multiple brokers. Only a few transport operators (generally the larger companies) rely on their own marketing or contacts to negotiate contracts directly with their clients. Cooperatives also play a role in contract assignments. Such cooperatives have added value for the clients by offering security of supply and security on costs, but also for their members, for instance by facilitating contract negotiations.
  • Again with regard to the market structure, it was observed that the IWT market presents two types of agents. On the one hand, there are those agents that constantly act in a battle to acquire the lowest cargo transport price in the market (“red ocean”), and on the other hand, the more added-value-oriented actors (“blue ocean”). Currently, at least in the dry cargo segment, the “red ocean” setting seems to prevail.
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    FIGURE 7 : “RED OCEAN” VERSUS “BLUE OCEAN”


    Source: NPRC

 

TRANSPORT RATES COMPOSITION – FORMATION OF THE PRICE

  • The inland navigation sector is a capital-intensive market. Within the sector, vessels have different cost structures, cost prices and revenues, depending on a series of factors such as the method of financing, sailing area, fluctuations in water levels and global trade.
  • However, it can be verified that the general cost structure of the IWT market comprises both the fixed and variable costs. Under the variable costs, expenses for the staff and fuel are important components, whereas for fixed costs, the depreciation of the vessel, interest rates for loans and insurance and maintenance represent a significant part of the operational costs structure.

 
GENERAL COST COMPOSITION

    FIGURE 8: GENERAL COST COMPONENTS


    Source: NPRC
     

  • The costs for lock, navigation rights etc. should be added to these cost components. In the chart above, financing costs are considered under the heading “Interest”.
  • With more specific regard to container transport, issues linked with inefficient container handling and congestion in seaports might also lead to additional costs (i.e. no optimisation of the use of vessel due to long stays in port, minimum call sizes which might impact total cost, all contribute to issues of staff shortages.) In order to make more profit, strategies to reduce costs are always being investigated by transport providers. For instance, strategies to optimise fuel consumption through a better training of staff or investments in greening technologies, good preventive maintenance, strategies to reduce staff cost (automation) etc.

 
GENERAL REVENUE COMPONENTS

  • As previously mentioned, within the IWT sector, vessels also have different revenues, depending on the sailing area, fluctuations in water levels, market structure, etc. At the workshop, particular attention was given to the impact of low water levels on freight rates. With the surcharge on freight rates, transport prices in IWT increase.
  • An example of a general revenue composition is given by adding:
    – the revenue basic multiplier which is obtained by the product of the practised freight rate and the cargo quantity transported (rate per tonne);
    – the low water surcharge (when operating on a free-flowing river and when it is a period of low water) as result of reduced loading capacity of a vessel;
    – the fuel surcharge – extra fee (paid by client) added when the current oil price exceeds a specific level;
    – the demurrage – fee (paid by client) as a result of failure to load or discharge the vessel within an agreed time period.
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FUTURE TRENDS ON PRICE FORMATION IN THE IWT SECTOR

  • During the workshop, the following future trends on price formation were raised:
    a. deindustrialisation due to high energy prices and transition costs;
    b. more severe low water levels on the Rhine in the future;
    c. degassing regulations in the field of liquid bulk (the change of liquid cargo in the cargo holds and the need for de-gassing has an influence on transport prices; the CDNI ban on degassing might also lead to more dedicated sailing and vessel capacity scarcity);
    d. decarbonisation of barge transport, specifically the need to adapt/replace the motor of the vessels in order to run on alternative fuels/new energy sources;
    e. energy transition will reduce transport demand for oil products in the long run and will lead to an increase for other types of products transported by inland vessels such as biomass and biofuels;
    f. automation: according to the experience of Novandi, automation was presented as an added value for the future of inland navigation for several reasons. Reducing costs in inland navigation (10% costs reduction on average), partly addressing the issue of staff shortage, added value for family life of crew members but difficulties with changed hierarchy on board ;
    g. staff shortage leading to higher staff costs;
    h. newly built vessels becoming more expensive;
    i. inefficient container handling in seaports/congestion, affecting more specifically container transport.

 

PRICE AND MODAL SHIFT: IS PRICE THE CENTRAL THEME FOR MODAL SHIFT?

  • For a long time, transport service buyers were preoccupied with price. Their main concern was to buy transport at the lowest price possible. More recently, even if price remains a decisive factor, other elements have come into play in making this decision, such as sustainability issues. Some cargo owners are for instance committed to use low emission transport modes, as long as it does not lead to a (certain) increase in prices.
  • Beyond price, other factors therefore play a central role when considering modal shift.
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    FIGURE 9: PARAMETERS OF MODAL SHIFT ACCORDING TO CEFIC


    Source: CEFIC analysis on IWT

 

MODAL SHIFT: IWT MUST TAKE ADVANTAGE OF ITS STRONG POINTS

  • Energy efficient and clean transport as well as innovative fleets.
  • Labour extensive: the staff shortage is becoming a pressing concern in many transport sectors. However, according to the European Shippers’ Council, the labour shortage challenge in IWT might be less difficult than in other more labour-intensive transport modes.
  • Ability to transport large volumes of goods.
  • Low level of accidents.
  • Safety of supply, additional capacity.
  • Capacity on infrastructure: in practice, cargo-owners face challenges in finding alternative modes, especially the capacity for rail-paths as the rail-infrastructure on the most important corridors is already congested. Compared to rail, the situation for inland waterway transport is greatly preferred as rivers and canals provide additional capacity for freight transport. This is certainly a factor which will be considered by cargo-owners.

 

IMPORTANT ASPECTS TO TAKE INTO CONSIDERATION FOR MODAL SHIFT

  • Developments in other modes – energy transition and automation: one should not be oblivious to the fact that the position of inland waterway transport will be influenced by external developments in other modes.
  • Realistic cost structure and disadvantages: for cargo owners, the overall cost of transport and logistics is more than simply the transport costs. “Shifting from road to inland navigation transport often involves reinventing the supply chain”. For instance, it should be ensured that sufficient storage capacity is available. Cargo owners must therefore have a clear picture of the total cost of shifting from road to inland navigation before making any decisions. In addition, additional investment costs might also be required on the side of transport suppliers if vessel owners ask for greener transportation modes to be used. Cargo owners should in these circumstances understand that longer-term contracts are necessary to guarantee innovation and obtain financing from the financial sector.
  • Make use of digitisation: digitisation enables the reduction of costs, in particular to facilitate information exchange among the different actors of the transport chain.
  • Reliability of transport: the cost that cargo owners might be ready to pay to ensure reliability of supply should not be underestimated. Inland waterways have always had a good track record in this regard. However, the influence of water levels on the inland waterway transport freight rates can lead to extremely high costs for cargo owners. Investments in infrastructure and a more adapted fleet is required to address this challenge.
  • Prepare for the future: the long-term perspective would be that the sector would have to be competitive with others on efficiency, reliability, sustainability and costs. The sector should prepare for this in the future and not only rely on its present sustainable profile.
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RECOMMENDATIONS TO POLICY MAKERS

  • As a general statement, it can be said that policies can have an impact on price. Yet policies affecting price should be limited to the minimum in free markets and be applied uniformly (not limited to certain regions for instance). In addition, such policies should be clear and unambiguous. As far as possible, regulations should not change in line with the political environment so as to provide a long-term vision for the IWT actors.
  • It became clear from this workshop that policy makers will not intervene on how price is formed but rather on other factors that influence price, and ultimately the competitivity of IWT – low water surcharge, fuel surcharge, congestion charge, sustainability and how investment might impact price.
  • Some examples of policies mentioned that can be implemented, and which can influence price:
    a) measures to increase the competitiveness of European base-industry;
    b) measures to reduce impact of low Rhine water levels and optimise navigation conditions;
    c) gradual implementation of decarbonisation measures in inland waterway transport;
    d) equal treatment of modes of transport (external costs and subsidies);
    – In a free market, and with regard to subsidies for modal shift, some participants indicated that funding should focus on start-up costs. Ultimately, the business case must be stand-alone. In addition, subsidies should not disturb the level-playing-field (currently, the level of subsidises for rail is higher than for IWT).
    – To ensure that cargo owners would pay a “fair price” the concept of internalising external costs – which in pricing refers to the practice of factoring in the negative externalities or indirect costs associated with a product or service into its price – is valuable. Externalities are costs or benefits that are not fully accounted for by the buyers and sellers involved in a transaction and are often imposed on society or the environment. This development has already materialised in EU proposals for an Emission Trading Scheme (ETS) applicable to road transport. Some regret that the internalisation of external costs would not apply to all modes.
    e) infrastructure investment;
    f) measures to have more market transparency;
    g) stronger funding programmes for the energy transition and terminal;
    h) measures related to fuel price taxation;
    i) measures contributing to raising awareness of cargo owners.

 

CONCLUSIONS

  • Different types and forms of price formation exist in the inland waterway transport sector, depending on the type of transport (dry cargo / liquid cargo / container). Some of these forms of price formation lead to volatile transport prices, in particular the orientation on the spot market in dry bulk transport. This phenomenon is often an obstacle to external financing by banks. More long-term forms of price formation (e.g. time charter) would therefore be one means of stabilising the sector and enabling investment in innovation (innovative vessels, greening of vessels).
  • The workshop also revealed trends that should have an influence on price formation in the future. A higher frequency of low water periods is one of those trends. In addition, automation as another trend can be an answer to staff shortage and can thereby reduce costs and prices in IWT.
    With respect to the link between price and modal shift, while cost price is an important consideration for cargo owners in their modal choices, it should be evaluated in conjunction with other factors such as environmental benefits and reliability of transport service. The suitability of a modal shift to inland waterway transport will ultimately depend on the specific circumstances of the transportation route and the types of goods being transported.
  • Overall, it seems that the way such a price is formed in inland navigation is not necessarily a decisive factor to foster modal shift. Indeed, when compared to road transport for instance, the structure of prices and how they are formed are not so different.
  • In addition, other modes face similar problems such as staff shortages and increase in fuel prices. A particular feature of price formation in IWT is the influence of low waters. This factor plays against modal shift as it lowers the reliability of inland waterway transport and increases the costs for cargo owners when using IWT.
  • Yet, policy makers have a role to play, not in the form of policy intervention affecting price formation but rather the factors that influence price. One such policy intervention can relate for instance to internalisation of external costs or fuel tax.
  • Norbert Kriedel, Administrator for Statistics and Market Observation, CCNR
    Laure Roux, Administrator for Economic Affairs, CCNR

Setting the scene: market structure and price formation in the inland waterway transport sector

 

  • Arno Treur, CFO, NPRC

Price formation and its characteristics in the IWT dry bulk transport segment 

 

  • Patrick Kulsen, Chief executive officer, Insights Global

Price formation and its characteristics in the IWT liquid bulk transport segment

 

  • Johan Gemels, Director, Novandi

Price formation in container transport

 

  • Godfried Smit, Secretary general, ESC (European Shippers’ Council)

The impact of price formation on the choice of a transport mode and the impact of shippers’ practice on price formation

 

PRICE FORMATION MODELS IN INLAND NAVIGATION FREIGHT TRANSPORT: EVOLUTION AND IMPACT OF FUTURE TRENDS

 

In partnership with the European Commission, the Central Commission for the Navigation of the Rhine (CCNR) carries out regular market observation reports about the development of inland navigation transport in Europe. Its publications consist of annual, semestrial and thematic reports. In the context of its market observation activities, the CCNR also organises thematic workshops.

The CCNR organised a thematic workshop on the topic “price formation in inland waterway transport” on 8 November 2023 in Strasbourg. The objective of this workshop was to identify the different schemes of price formation in inland navigation freight transport, their evolution over time and the possible trends that might affect such schemes in the future (low waters, energy transition).

For this purpose, the workshop addressed the different factors influencing price formation (market structure, type of contracting, acquisition of contracts, competition setting, market segment and geographical area concerned).

The views of a wide range of actors was sought: inland vessel operators, shippers, multimodal operators, freight forwarders, brokers, cooperatives, banks, institutes publishing information about freight rates, ports…

Information about price formation in other transport modes was also shared.

The workshop was held in English.

Programme

• Serbia is a middle Danube country where agricultural products, foodstuffs, iron ore and metals represent the core market segments in IWT. The production level of the Serbian steel industry has seen a boost in recent years due to foreign direct investment from China. Serbian IWT has benefited from these investments.
• Transport demand, as well as the company sector and employment in Serbian IWT are strongly focused on dry mass cargo transport. The Serbian fleet has a relatively high number of push boats, which reflects this focus on dry mass cargo, often transported by pushed convoys.
• The modal share of IWT is 28.7% in Serbia, strongly above the average of the EU.

 

INLAND WATERWAY TRAFFIC IN SERBIAN PORTS *


    Sources : Danube Commission, Port Governance Agency of the Republic of Serbia
    * IWT in 2020

 

DEVELOPMENT OF INLAND WATERWAY TRANSPORT IN SERBIAN PORTS

  • Among the five main Serbian ports, the port of Smederovo, in particular, has developed positively since 2014. While goods handling increased also in Pančevo, Prahovo and Novi Sad, the port in the Serbian capital Belgrade has lost large volumes of transport.
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    FIGURE 1: YEARLY INLAND WATERWAY TRANSPORT OF MAIN SERBIAN PORTS (IN 1,000 TONNES)


    Sources : Danube Commission, Port Governance Agency of the Republic of Serbia
     

  • In the first quarter of 2021, the total waterside cargo turnover of the Serbian ports amounted to 3.7 million tonnes, which was significantly higher than the volume of Q1 2020 (1.8 million tonnes).
  • Inland waterway transport in Serbia, reflected by figures shown above on goods handling in ports, is mainly dominated by two economic sectors: the steel industry and the agricultural sector. In 2018 and 2019, steel production in Serbia was five times higher than in 2013. The reason for the surge between 2013 and 2018 is the takeover of the main Serbian steel plant in Smederovo by a Chinese steel company in 20161.
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    FIGURE 2: YEARLY STEEL PRODUCTION IN SERBIA (IN 1,000 TONNES) AND SHARE WITHIN TOTAL STEEL PRODUCTION IN THE DANUBE REGION (%)


    Sources : World Steel Association, CCNR analysis
     

  • After acquiring the Smederovo steel plant, the Chinese company HBIS invested in its technical renovation, which resulted in a strong increase of steel production and raw material transport.
  • The Danube in this section is now again used intensively for the delivery of raw materials (iron ore, coal), via the port of Smederovo. This explains the strong increase in inland waterway transport in the port and boosted Serbian IWT.
  • It proves also the dependence of IWT upon traditional industries in the Danube region.
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FACT SHEET IWT IN SERBIA – ANNUAL FIGURES


     

    Sources: CCNR analysis based on Eurostat data [sbs_na_1a_se_r2], [iww_go_qnave], OECD short time indicators, Danube Commission (fleet data), Statistical Office of the Republic of Serbia
     
    Notes on the factsheet:

    • ‘Share in EU total’ contains figures for the EU plus Switzerland and Serbia.
    • In contrast with transport performance, for transport volume, a country-specific share cannot be calculated.
    • The modal split share is defined as the percentage of inland waterway freight transport performance (in TKM) within total land-based transport performance. Land-based freight transport modes include road, rail and inland waterways. The road freight activity is reported according to the territoriality principle, where international road freight transport data are redistributed according to the national territories of where the transport actually takes place. These principles are implemented in the Eurostat series [tran_hv_frmod].

• Freight rates for dry cargo and container transport started on a limited upward movement from the second half of 2020 onwards. In the first half of 2021, this movement continued. For liquid cargo freight rates, however, no recovery can be gathered from the data.
• Both oil and fuel prices continued their upward trend in the first half of 2021. Fuel prices in IWT rose by 12.5%, from 45.29 €/100L in Q1 2021 to 50.96 €/100L in Q2 2021.
• Throughout the second half of 2021 and in 2022, fuel prices in IWT are expected to lie in the range between 54 and 60 €/100L. The basis for this outlook is oil price forecasts.

 

FREIGHT RATES IN THE RHINE REGION 1

  • In the first half year 2021, gasoil spot market freight rates within ARA-Rhine trade followed a negative trend. This was a continuation of the development that started after the low water period of 2018. One main driving force that puts a strain on freight rates is the ongoing pandemic with its negative influence on mobility and fuel demand. With regard to hydraulicity, freight rates were also not supported, as water levels were rather high, except for a period at the end of April. On the spot markets for oil products, rising prices also delivered negative influences on transport and freight rates. Finally, the term structure on future markets was orientated towards backwardation.
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    FIGURE 1: 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.

     

  • Statistics Netherlands (CBS) collects freight rate data from a panel of Dutch IWT companies. These data are observed twice a quarter and include fuel and low water surcharges.
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    FIGURE 2: 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)
     

  • The third quarter of 2020 seemed to be the period when transport prices for dry bulk and container transport stabilised. For subsequent quarters, an upward trend is seen. For liquid cargo, freight rates remained at a low level.
  • In the absence of low water levels in the first half year 2021, freight rates were mainly influenced by transport demand. As chapter 1 has shown, transport demand for liquid bulk was decreasing somewhat, while dry bulk and container transport were upward orientated. The development of freight rates per cargo segment reflects these differing trends.

 
 

FUEL COST EVOLUTION

  • Fuel costs are analysed on the basis of gasoil/diesel prices published by the energy price monitoring system of the Belgian Ministry of Economic Affairs2. 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 2021, oil prices – and therefore also fuel prices – continued to follow an increasing trend. Oil prices reached US dollars 68.8 in the second quarter of 2021 (approximately 57.3 Euro as the exchange rate was USD/EUR 1.20).
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    FIGURE 3: 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 WEO Update July 2021; EIA = US Energy Information Administration. The forecast assumes a nominal exchange rate of 1.17 US dollars per euro throughout 2021 and 2022.

     

  • The US Energy Information Administration (EIA) forecasts – in its latest short-term outlook from September 2021 – Brent crude oil spot prices to average around 72 US dollars per barrel in 2021, and around 66 US dollars per barrel in 2022, compared with an average of 41.8 US dollars in 2020. The IMF oil price outlook points to slightly lower values. This lies in different assumptions regarding the pace of economic recovery and the growth of oil production from OPEC countries and the US3.
  • Fuel prices in European IWT are not only influenced by oil prices but also by the exchange rate between US dollars and euros. The depreciation of the US dollar towards the euro, starting in March 2020, continued until May 2021, reaching 1.22 US dollars per euro at the end of that month. This dampened fuel prices in European IWT. In August 2021, the euro lost some value compared to the US dollar due to a weak business cycle in Europe and settled at 1.17-1.18 US dollars per euro until September. It is expected that the European currency will not deviate much from this range throughout 2021 and 202245.
  • Based on this reasoning, fuel prices in IWT are expected to remain in the range between 54 and 60 €/100L throughout the rest of 2021 and in 2022.

• Transport performance (TKM) on inland waterways in Europe (EU plus Switzerland, Serbia and Ukraine) increased by 4.0% in the first quarter of 2021 compared to the same period in 2020. For the different cargo segments transported on the Rhine, dry cargo saw an increase, whereas liquid cargo was slightly weaker in Q1 2021.
• Passenger transport, and more precisely river cruises, are struggling to recover with a continuous low level of cruise vessel traffic on the Upper Rhine (lock of Iffezheim). The number of vessels passing this lock dropped by 12.7% in the first half year of 2021 compared to the same period the previous year. The gap in (Q1+Q2) 2021 compared to (Q1+Q2) 2019 amounts to 94.9%.

 

TRANSPORT PERFORMANCE IN EUROPE

    TRANSPORT PERFORMANCE IN IWT ON THE NATIONAL TERRITORY OF EACH COUNTRY IN EUROPE – COMPARISON BETWEEN Q1 2020 AND Q1 2021 (IN MILLION TKM) *


    Sources: Eurostat [iww_go_qnave], OECD (Switzerland, Serbia, Ukraine)
    * For the UK, data were not available.

     

    FIGURE 1: INLAND WATERWAY TRANSPORT (IWT) PERFORMANCE IN EUROPE BY REGION AND QUARTER (IN MILLION TKM)


    Sources: Eurostat [iww_go_qnave], OECD (Ukraine), Destatis (Rhine and affluents)
    * Danube = TKM in all Danube countries including Ukraine

     

  • After a period of decreasing transport performance (low waters in 2018, macroeconomic weakness in 2019, Covid crisis in 2020), cargo transport on the Rhine and on Dutch waterways started to recover between Q3 2020 and Q1 2021. More recent data (for the lock of Iffezheim on the Upper Rhine) point to an increase of 4.7% in transport volume during the first eight months of 2021, compared to the same period in 2020. However, the difference compared to the level in the first eight months of 2019 was still 6.9%.
  • While transport performance in Belgium and France was rather constant, with some fluctuations, Danube navigation continued its upward trend.
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    RHINE AND DANUBE NAVIGATION PER CARGO SEGMENT

    FIGURES 2 AND 3: RHINE TRANSPORT VOLUME UPSTREAM AND DOWNSTREAM FOR MAJOR CARGO SEGMENTS (IN MILLION TONNES, FOR THE FIRST THREE MONTHS OF 2020 AND 2021)



    Source: CCNR analysis based on Destatis
     

  • Cargo transport on the traditional Rhine amounted to 42.7 million tonnes in the first quarter of 2021, compared to 42.5 million tonnes in the same quarter the previous year. The comparison shows that dry cargo had higher volumes in Q1 2021 than in Q1 2020, while liquid cargo (in particular petroleum products) had lower volumes.
  • These differences can be explained by the recovery of steel production and the increase of steam coal demand (because of high gas prices) in 2021, and the related increase in dry cargo transport of iron ore, coking coal and steam coal. Steel production in Germany was 15% higher in the first five months of 2021 compared to the same period in 2020. The drop in petroleum products is explained by a reduced mobility due to the pandemic. The future will show if this could become a structural phenomenon.
  •  

    FIGURES 4 AND 5: MIDDLE DANUBE TRANSPORT VOLUME UPSTREAM AND DOWNSTREAM FOR THE MAJOR CARGO SEGMENTS (IN MILLION TONNES, FOR THE FIRST THREE MONTHS OF 2020 AND 2021) *



    Source: Danube Commission market observation report
    * On the Middle Danube at Mohács

     

  • Iron ore transport on the Middle Danube increased slightly in Q1 2021, reflecting also the recovery in the steel market which is relevant both for Rhine and Danube navigation. Furthermore, the upward trend in grain transport that occurred in 2020 continued on the Danube also in 2021.
  • A certain balance of freight transport on the Danube was ensured by the transportation of significant volumes of grain from the ports of the Middle Danube in direction of the port of Constanța. At the same time, the cargo turnover of the port of Constanța by river traffic amounted to 4.1 million tonnes in Q1 2021, which was 15.3% higher than in Q1 2020. Accordingly, the transport volume on the Danube-Black Sea canal amounted to 4.37 million tonnes, which was 12.3% more than in Q1 2020.

 
 

PASSENGER TRANSPORT

  • The number of cruise vessels passing the lock of Iffezheim at the Upper Rhine is chosen as an indicator for passenger transport. Data on cruise vessels on the Rhine are an important indicator for the European cruise sector, as the Rhine enjoys the second highest cruising figures in Europe after the Danube.
  • In the second half of 2020, cruising partly recovered, in parallel with a partial termination of lockdown rules. In the first half of 2021, however, figures dropped again to very low levels.
  •  

    FIGURE 6: NUMBER OF RIVER CRUISE VESSELS PASSING THE LOCK OF IFFEZHEIM AT THE UPPER RHINE PER HALF YEAR (FOR THE SECOND HALF OF THE YEAR 2021, DATA WERE NOT AVAILABLE)


    Source: German Waterway and Shipping Administration
     

  • At the time of writing the report, figures were available until the month of August 2021. In this month, the number of cruise vessels passing the lock of Iffezheim increased sharply. However, it is far too early to consider this as a definite recovery in this market segment. Several indicators show that the pandemic is not yet over, so that a rebound of the crisis cannot be ruled out.
  •  

    FIGURE 7: NUMBER OF RIVER CRUISE VESSELS PASSING THE LOCK OF IFFEZHEIM AT THE UPPER RHINE PER MONTH


    Source: German Waterway and Shipping Administration
     

  • In June 2021, a number of cruise vessel voyages took place on the Danube, operating to begin with at an average number of 115-125 passengers. In total, 13 vessel passages took place on the Upper Danube in June and 1,700 passengers were transported. In July the number of passages increased to 148, and in August to 330. At the same time, passenger transportation was renewed in the direction of the Danube Delta.

 
 

TRANSPORT VOLUME IN MAIN EUROPEAN IWT COUNTRIES

    FIGURE 8: INLAND WATERWAY TRANSPORT VOLUME IN MAIN EUROPEAN IWT COUNTRIES (IN MILLION TONNES, QUARTERLY DATA OF TRANSPORT VOLUME ON THE NATIONAL TERRITORY OF EACH COUNTRY)


    Source: Eurostat [iww_go_qnave]
    Due to a lack of plausibility of Stat.Bel data as from Q1 2018, the data for Belgium from this quarter onwards were recalculated. This was done by applying the rate of change that is present in the more plausible data from the Flemish waterway administration (De Vlaamse Waterweg). The series for Belgium then follows the trend for Flanders, but is located on a higher level.

 
 

DRY BULK, LIQUID BULK AND CONTAINER TRANSPORT

    FIGURE 9: DRY CARGO TRANSPORT (IN MILLION TONNES)



     

    FIGURE 10: LIQUID CARGO TRANSPORT (IN MILLION TONNES)



     

    FIGURE 11: CONTAINER TRANSPORT (IN MILLION TONNES)



    Sources: Eurostat [IWW_GO_QCNAVE], Destatis. Centraal Bureau voor de Statistiek, De Vlaamse Waterweg, SPW Service Public de Wallonie, Voies Navigables de France, Romanian Institute of Statistics
    Note: For Belgium-Wallonia, infra-annual container statistics in tonnes are not available. The product group “machines/other goods” was assumed to consist mainly of container transport. The data contain total IWT on the territory of the country/region.
  • Transport performance (TKM) on inland waterways in the EU has been adhering to a small and rather narrow recovery path since Q3 2020. In the first quarter of 2021 (Q1 2021), transport performance was 4.0% higher than in Q1 2020. Rhine countries experienced an overall increase of 1.0%, while Danube countries followed a more dynamic surge (+14.8%), thanks to growing grain transport.
  • For the two largest IWT countries, Germany and the Netherlands, the result remained almost stable in Germany (-0.1%) while a small increase was observed for the Netherlands (+1.9%).
  • A differentiation by cargo segments for the Rhine reveals that dry cargo (iron ore, coal, grain) increased slightly, whereas liquid cargo had weaker results in Q1 2021 compared to the same period the previous year. This was due to a reduction of petroleum products transport, reflecting the impact of the pandemic on the mobility sector.
  • Passenger transport still remained far below pre-pandemic levels in the first half year of 2021. Data for the lock of Iffezheim on the Upper Rhine indicate that only 55 cruise vessels passed this lock in the first half year of 2021, compared to 63 in the first half year of 2020, but 1,078 in the first half year of 2019. The gap between (Q1+Q2) 2021 and (Q1+Q2) 2019 represents 94.9%.
  • Freight rates for dry cargo and container transport have increased since Q3 2020, mirroring the recovery in transport demand. Freight rates for liquid cargo have not shown any recovery since this quarter. The reason is a structurally reduced mobility demand that reduces transport demand for liquid products.
  • During the course of 2021, oil prices and thus fuel prices, continued on an upward trend that began in late 2020. Fuel prices settled at around 50 Euro per 100 Litres in Q2 2021. The forecast for fuel prices points to a range between 54 and 60 Euro per 100 Litres for 2022, based on oil price forecasts.
  • A special chapter of the report is dedicated to Serbia. The IWW transport performance amounted to 4,225 million TKM for the year 2020, which accounts for a share of 3.2% within transport performance in the EU (plus Switzerland, Serbia, Ukraine). The focus of IWT in Serbia lies in the transport of dry mass cargo. Within Serbian IWT, a positive development in recent years was the strong increase in iron ore and steel transport in the port of Smederovo. This development was facilitated by the renovation of the main Serbian steel plant by a foreign steel company.
  • The employment in Serbian IWT is largely dominated by freight transport, where 1,018 out of 1,087 IWT workers are active.
  • The modal split share of IWT within total land-based transport performance is 28.7%, making IWT a core transport mode in this Middle Danube country.