Supply disruption rises as Rhine levels fall

The flow of commodities to inland Europe is starting to buckle as water levels on the Rhine river continue to fall, reports Bloomberg. 

The lack of water is contributing to oil product supply problems in Switzerland and preventing at least two power plants in Germany from getting all the coal they need. The news comes as heatwave temperatures are forecast to climb even higher.

The Rhine, which runs from Switzerland to the North Sea, is used to transport tens of millions of tons of commodities through inland Europe.

Water levels are at their lowest for the time of year since 2007, limiting how much fuel, coal and other vital cargo that barges can carry.

The major river and its tributaries act as a key motorway for petrochemicals and oil products in northwest Europe, while many plants located on the Rhine’s banks also use its water for cooling.

Will parametrics pay out?

Some insurance companies have structured parametric insurance solutions to transfer the additional costs of operating during such droughts, using river gauges and other data as a trigger for payouts.

“For shipping companies on the Rhine, the direct physical effects of the decreased water level may be non-existent, but the costs of business interruption and associated revenue loss are significant,” explains Marsh McLennan. ”A parametric cover based on the water-level would help protect against lost revenue in this instance.”