- Norbert Kriedel, Administrator for Statistics and Market Observation, CCNR
Laure Roux, Administrator for Economic Affairs, CCNR
- Arno Treur, CFO, NPRC
- Patrick Kulsen, Chief executive officer, Insights Global
- Johan Gemels, Director, Novandi
- Godfried Smit, Secretary general, ESC (European Shippers’ Council)
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.
• 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.
- 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.
- 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.
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
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
FACT SHEET IWT IN SERBIA – ANNUAL FIGURES
- ‘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].
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:
• 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.
- 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.
- 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.
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.
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)
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).
- 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.
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.
• 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
- 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.
- 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.
- 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.
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
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
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
- 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.
- 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.
- 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.
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
FIGURE 7: NUMBER OF RIVER CRUISE VESSELS PASSING THE LOCK OF IFFEZHEIM AT THE UPPER RHINE PER MONTH
Source: German Waterway and Shipping Administration
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.