Euromoney sits down with a source to discuss electronic bond trading. The conversation soon turns to the comparative market share of the big platforms in green bonds and to how asset managers incorporate ESG considerations into secondary markets in fixed income.
The trader shows us a photo from a recent trip to the Swiss mountains and the source of the Rhine. Within the normally wide and steep channel, lies a narrow brown trickle.
Back in the office, Euromoney reads a note from economists at Deutsche Bank. Low water levels are causing growing concern. Germany is turning its coal-fired power stations back on to ease the country through Russia’s withholding of natural gas.
[In 2018,] traffic came to a standstill. If that happens again, the economic consequences will be much more serious
Much of that hard coal travels by barge along the Rhine, coming from Amsterdam, Rotterdam and Antwerp. One 110-metre-long barge can normally carry as much as 150 heavy trucks: that is roughly 3,000 tonnes of coal.
But not when water levels are this low.
The key measure is the so-called Kaub gauge on the middle Rhine, a rocky stretch through the centre of the country where the navigation channel is narrow and shallow, and not fed by tributaries. When the Kaub gauge falls below 75 centimetres, barges might still get through, but they must carry smaller loads, at least 30% below normal.
“Therefore, transport becomes more expensive due to so-called low-water surcharges and because the cargo potentially has to be distributed over more ships,” notes Marc Schattenberg, senior economist at Deutsche Bank. Those ships are now in high demand, also being needed in eastern Europe to transport grain along the Danube from Ukraine.
Economic consequences
Low water levels aren’t just a concern for transport but also for companies that rely on drawing water from the Rhine for cooling purposes. Withdrawal quantities as well as the re-entry temperature of water are subject to limitations.
Low water levels usually occur at the end of summer or beginning of autumn. This year, problems were already mounting in July. Right now, the water level of the Rhine is tracking the recent lows of 2018 when traffic came to a standstill. If that happens again, the economic consequences will be much more serious.
“According to company reports, coal reserves at most German power-plant sites are currently only sufficient for about one week of full-load operation,” the Deutsche economists report.
It's not just a problem in Germany. In the UK, renowned among visitors the world over for its summer rain, water companies are imposing hosepipe bans in the south of the country. Before energy rationing, we have water rationing.
Euromoney calls back to see what our bond trader makes of all this after seeing the Rhine at its source. “The planet is trying to tell us something.”