Europe’s heatwave forced the closure of the Rhine to barge traffic from last Friday as water levels fell 4cm below the depth necessary for operations, raising fears for container shipping and industrial disruption.

The Rhine, the second-largest river in central and western Europe, runs 760 miles from the Swiss Alps to the North Sea, with significant container volumes moving between Rotterdam, Antwerp, Germany and Poland.

The depth of the Rhine was down to 49cm on 7th August at the gauge tower at Kaub, a bottleneck widely considered to be the most important point for navigators assessing depth. At 41cm the river becomes all but impassable and the river dropped to 37cm on 13th August. 

Levels at the Kaub chokepoint are lower than they were at the same point in 2018 ahead of that October’s historic low of 25cm. The water was so low the river was closed to ship traffic for weeks, forcing companies to switch freight to railways and roads.

Millions of tonnes of containers and conventional cargoes are shipped on the Rhine and any drop in capacity will hit industrial production. Similar drought conditions in 2018 saw production drop by 1.5%.

Operators have been running services at 20% capacity (which has already generated a containerbacklog) to reduce the depth they require, but with water levels dropping a further 5cm over the weekend, they have had to discontinue navigation on the Upper and Middle Rhine.

The river’s closure has come at an already challenging time for European supply chains, which are dealing with continuing port congestion, the repercussions of the war in Ukraine and increasing industrial unrest.

The most unfortunate shippers will be wondering how they can retrieve containers already out on barges when the closure was announced and get them to the nearest terminals for unloading.

Barge operators say they will position vessels to safely unload containers at terminals and move overland between the terminals on the Upper, Middle and Lower Rhine, although this is not assured, as there are fears that water levels could fall well below 27cm record and switching from barge to rail brings a premium, which can be substantially more to move goods by road.

Please read the attached link to Loadstar with an informative article from last week in the prominent trade press that provides further details - https://theloadstar.com/rhine-closure-imminent-as-low-water-hobbles-freight-movement-by-barge/

The UK and Europe's supply chains are being hit with many unimaginable challenges over recent months that will continue in 2022 and 2023. Metro will always be at the front of the industry and leading innovation and initiatives to ensure that we work around issues and deliver the best available and competitive solutions within any environment regardless of the reason for the disruption.

The impact of the Rhine’s closure to barges will not directly impact many of our customers, but the knock-on impact to continental container ports could be profound and may impact traffic diverted from Felixstowe, in light of next week’s strike.

We are closely monitoring the situation in Germany and other affected countries and how it extends to European ports, because delays and congestion there may impact the repatriation of cargo and UK vessel calls, with extended overall transit time.

For further advice and updates, please call your Metro team. We will provide the latest information and options, to ensure your product is delivered to the right place at the right time, competitively. It’s what we do.

As we enter the traditional peak season for sea freight, demand for space from China is falling and the lines are taking action to counter over-capacity in the North Europe and Mediterranean trades, while transPacific demand in stasis.

As Hapag-Lloyd published its Q2 2022 results, the impact of increasing contract rates in 2022 is clear, with more record breaking profits and average freight rates up 70% year-on-year, even with the supply/demand equation shifting in favour of the shipper. 

The overall picture is mixed, with rates on some routes experiencing downward pressure, while continuing port congestion has reduced the amount of effective capacity, which stops rate erosion on others. Most notably on the Asia-North Europe trade lane, where major hub ports are suffering a combination of increased import dwell times, labour shortages and industrial action.

Ocean carriers will be looking to blank as much capacity as possible in the short term, to move the supply/demand equation back in their favour.

While no blanking details have emerged, research by Sea-Intelligence has found that certain sailings crop up repeatedly, when it came to blank sailings from Asia to North Europe.

The Danish analysts measured the average number of weeks between a blank sailing on each respective service, to identify those most at risk of blanking.

2M’s AE5/Albatross and AE10/Silk were blanked once every 9-13 weeks in the last 12 months, while AE55/Griffin and AE6/Lion were blanked every 5-6 weeks in the last 12 months.

Ocean Alliance’s AEU2 and AEU6 were hardly blanked in the last 12 months, while AEU7, AEU9, and AEU1 were blanked every 5-7 weeks, while THE Alliance services, were all blanked quite frequently.

Carriers favour certain services, either by virtue of value, routes, or the ports that they call at and knowing which services are more likely to be blanked help us limit disruption to our clients’ supply chains.

To move cargo on specified vessels and routes, in the most efficient and cost-effective method, we apply the most beneficial pricing model for our customer, which may be based on contracts, FAK or spot rates.

We negotiate annual volume and rate contracts across the three alliances, primarily for the largest shippers, who need pricing stability and the best space guarantees.

Freight All Kinds (FAK) pricing allows us to leverage our buying power, to get competitive rates from individual shipping lines on a variety of routes, locked-in for a specified period.

The spot-rate market can offer the lowest rates, but it applies to individual sailings and needs to employed with caution, to minimise instability. It is by far the most unpredictable pricing model, with significant risks, such-as cargo rolling, which may result in financial and transit penalties.

We negotiate long-term and FAK contracts with shipping lines across all three alliances to secure space and rates, to provide the best alternatives and options, whatever the situation.

By leveraging agreements across the alliances - and spot rates, when appropriate - we can often adapt port pairs and routings, to work around blanked sailings, to maintain resilient and reliable supply chains.

With around 80% of global trade transported by sea and three major shipping alliances controlling 95% of the critical trade lanes from Asia to North America and Europe, a handful of shipping lines have massive influence over the cost and effectiveness of international trade.

The three major shipping alliances - 2M, THE Alliance, and Ocean Alliance - were formed in 2017 to support economies of scale, low prices and broad service coverage. These three alliances account for 80% of the global container market, with greater market share on many trade routes.

The high fixed-cost structure of shipping lines is one of the main arguments for shipping lines to collaborate. The rationale being that each liner service requires investment in a number of vessels to complete round trip voyages between different ports, which will sail on fixed dates regardless of how much cargo they are carrying, often leading to very poor utilisation, which is cost ineffective and environmentally unfriendly. 

However, allowing collaboration between carriers, means that the alliance partners can agree to operate a liner service along a specified route using a specified number of vessels. It is not necessary for each alliance member to allocate equal numbers of vessels, because the space that is available for loading and discharging at each port of call is shared between the partners.

The amount of space that each partner gets may vary from port to port and could depend on the number of vessels which are operated or placed by the different partners within the agreement and means that the partners have flexibility to meet demand and increase utilisation rates, which reduces operating costs and boosts efficiency.

Collaboration in this way has allowed the alliances to leverage each partner’s geographic strengths to develop more comprehensive global shipping networks, which have extending coverage and provide more routes, which improves the service offerings for their customers.

Entering alliances seems to be a good fit for smaller lines, that benefit from the extended service coverage and larger shipping lines who can bleed their assets. This is demonstrated in the different strategies of MSC and Hapag-Lloyd, with the former focused on organic growth and the rapid growth of its fleet, while Hapag-Lloyd has been collaborating in partnerships since 1989 and has only recently committed to the acquisition of the mega-ships, that have become synonymous with the rise of the alliance on the trade lanes from Asia.

The three major shipping alliances collectively account for 80% of the shipping market and include all of the biggest container lines:
2M Alliance: Maersk and MSC
Ocean Alliance: COSCO, OOCL, CMA CGM, and Evergreen
THE Alliance: Hapag-Lloyd, ONE, Yang Ming , HMM

Metro leverage opportunities across the shipping alliances, with long established relationships across a portfolio of carrier partners, to give our customers access to new solutions and the widest range of service offerings, port-pairings and rates.

By working closely with our global network and inland logistics partners we deliver a range of upstream and downstream value added services, initiatives and solution innovations, which the carriers cannot match. 

Our bespoke solutions are always driven by our customers’ requirements and expectations. For further information contact Elliot Carlile, who would be delighted to talk to you about your requirements.