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The Rhine river is the lynchpin of Europe’s network of inland waterways. The river, which is connected to the Danube via canal, runs about 800 miles through Swiss and German industrial zones before emptying into the North Sea at the busy Rotterdam port in the Netherlands. Rhine river is facing extremely low water levels (similar to 2018) as it has started to dry up because of extreme heat. The river is currently lower than it was at this time of year in 2018, when low-water during the autumn shaved some 0.4% off total German output. If the problem persists, the European chemicals supply chain would come to a halt. Cargo ships have already begun to reduce their loads making transport more expensive. Rhine-related issues are starting to ripple through the region.
A German refiner reported a run-on heating oil and diesel. Mstack sources also came to know that the leading chemical suppliers from Germany are going to announce production cuts across the downstream chemicals due to raw material (Natural gas & Ammonia) shortages. Switzerland is tapping fuel reserves and reported hydropower levels at the lowest since 2017. Ferries in the Netherlands have had to halt, affecting cars, trucks even and bicycle traffic in some areas. Europe is already suffering in importing natural gas from new sources via ocean route as the Nord Stream pipeline has become just a piece of pipe after the Russia-Ukraine conflict. So, it’s going to be a really harsh winter this time for Europe.
Mstack expects a dramatically reduced supplies by European chemical suppliers to Asia in October-December’22 quarter. Mstack also expects a raw material shortage of solvents for pharma APIs and agrochemicals, volatility in prices of key personal care intermediates and advanced pharma intermediates and overall increased freight costs.
What Mstack recommends to Asian consumers!
1) Distributors outside of Europe are recommended to carry large inventories as this low water level is colluding with impending winter in Europe. Prices of commodities are expected to rise to record high levels in Oct-Dec’22 quarter. An optimum inventory planning would be a catalyst in driving distributors’ margin this winter
2) End consumers in Asia are advised to develop alternate sources of supplies outside of Europe. Mstack also recommends consumers placing forward orders and getting into long term contracts with existing European suppliers to allocate sufficient raw material
