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Falling water levels at the Rhine River due to prolonged hot weather in Europe, with no immediate sign of likely rainfall, are starting to impact the activities of some chemical producers reliant upon the key inland trade waterway.

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As the river's water levels head toward their lowest for four years, logistical challenges are starting to emerge, according to S&P Global Commodity Insights. In the European butadiene market, participants situated along the river "were facing difficulty in transporting the material to and from their sites because of low water levels," it says. Parts of the river were essentially closed as levels fell below the 50-centimeter (cm) cutoff mark in places, driving players to rely more on railcars and trucks.

The low water levels are exacerbating supply constraints by making product transportation via barges in the inland market tough, S&P Global says. Sourcing appropriate barges suitable for low water levels was not easy and had led to delivery delays, forcing some sellers to look at railcars and other alternatives, according to one trader.

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European butadiene prices were already on the rise, supported by robust export demand and tight supply, according to Platts, part of S&P Global. The FD Northwest Europe butadiene spot price was assessed at €1,600/metric ton ($1,652/metric ton) for the week ended 5 August, up €100/metric ton over the prior week. US export demand combined with falling output, with at least two producers experiencing butadiene production issues in the European market, according to sources.

The low level of the Rhine could further exacerbate the situation for butadiene and other products, with the water depth falling to around 46 cm in places on 10 August, S&P Global says. Talk among European methyl tert-butyl ether (MTBE) players was of ongoing tight supply and strong demand for MTBE, with deliveries complicated by the low river water levels, it says.

The falling Rhine levels are also believed to be making it difficult for solvent producers to move product and feedstocks, with producers offering less product as a result, it says. A shortage of truck drivers in parts of Europe was also believed to be exacerbating logistical issues, it adds.

Water level at the Kaub choke point in Germany was already down to 56 cm on 5 August. "Around 1.0–1.5 meters is generally fine," said one methanol trader. Central European supply of methanol was constrained because of the low water levels in early August, which resulted in reduced product volume and delayed barge loadings, S&P Global says.

European methanol prices declined week on week on 5 August amid seasonally weak demand, even as supply constraints persist. Platts assessed the FOB Rotterdam five- to 30-day methanol spot price at €383/metric ton on 5 August, down from €386/metric ton on 29 July.

Sources said little immediate impact was evident up to this point on the European ethylene market from the decline in water levels. Vessels typically begin underloading cargoes when the Rhine water level approaches the 1-meter mark.

Steam crackers on the upper reaches of the river may have to further lower operating rates if feedstock deliveries are interrupted, while hot weather that blanketed much of western and central Europe was also heard contributing to lower operating rates, which were initially triggered by weakening demand across the ethylene and propylene segments, S&P Global says.

The European industry-settled ethylene contract price for August was fixed at €1,425/metric ton on 1 August, down €70/metric ton from the July contract price on subdued downstream demand. The ethylene contract price is the lowest since February this year.

German authorities say water levels at Kaub could drop below 40 cm by 12 August to the mid-30s by midmonth. This is not yet as low as levels experienced in October 2018 when the Rhine hit a record low of 25 cm at Kaub.

BASF's chemicals complex at Ludwigshafen, Germany, uses the Rhine River for the transport of feedstock supplies and some end products. According to BASF chairman Martin Brudermüller, speaking during the company's recent second-quarter earnings call, BASF in 2018 "took a lot of mitigation measures, including infrastructure." The company installed an early-warning forecast system, giving it at least six weeks' lead time to know what is coming, he said. "This gives us time to prepare in terms of logistics measures and to increase inventories," he said.

The company also changed its cooling water system, making it much less vulnerable to river temperatures, he said. BASF also leased barges that can sail at much lower Rhine water levels, and "can shuffle from ships to other logistic needs. We're not worried about having a similar situation to 2018. We're much better prepared," he said. BASF has not yet announced any impact on its chemicals production due to the Rhine's declining levels.

In 2018 BASF halted production of toluene diisocyanate (TDI) at Ludwigshafen due to the Rhine's all-time low depth and its impact on delivery of certain key TDI feedstocks.

The Rhine flows past other chemicals complexes including Shell's Rheinland refinery at Wesseling, Germany, and Ineos's Cologne-Gordorf complex, into the Amsterdam, Rotterdam, Antwerp (ARA) petrochemicals and refining hub.

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