Low water levels on Germany’s Rhine river are raising cargo transport costs and disrupting logistics, adding pressure to Germany’s fragile economic recovery, analysts said on Tuesday.

Impact on Industry

The Rhine is crucial for transporting raw materials, fuel products, and manufactured goods. The heatwave and reduced rainfall this summer in western Europe caused a sharp fall in Rhine water levels, with cargo ships often only sailing about 20% full.

Germany’s Thyssenkrupp Steel told Reuters the worsening low water is now affecting the supply of raw materials to its Duisburg plant and it has slightly reduced blast furnace production because of the somewhat restricted supply of raw materials.

Most vessel sailings continue, but operators impose shallow water surcharges on freight prices to compensate for vessels not sailing fully loaded, increasing costs for cargo owners. Loads are spread among several vessels, also increasing prices.

Risk to Economic Recovery

Germany’s industry has recently shown signs of improvement, with factory orders, exports, and industrial production posting stronger than expected gains in May. However, transport-related supply chain disruptions would be an unwelcome headwind for a stabilizing industrial sector, according to Deutsche Bank Research economist Marc Schattenberg.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.