As the water level of the Rhine River, called Europe's logistics aorta, has fallen to a record low due to severe drought, chemical corporations around it are facing an emergency in producing and transporting feedstocks. Some expect domestic companies to benefit as global chemical product prices rise on supply shortages.
The Rhine is a 1,320-kilometer-long river that starts in Switzerland and runs through major European countries including France, Germany, Belgium, and the Netherlands. Because it flows into the North Sea and can also reach the Black Sea via inland canals, it is considered a key corridor for international logistics transport.
Based on European media reports on the 21st, the Rhine's water level has dropped to an all-time low due to extreme heat. According to data from Germany's Federal Waterways and Shipping Administration (WSV) on the 18th (local time), the gauge at Kaub in the middle reaches of the Rhine is around 6–8 centimeters. This is the height from a reference point, not the river's actual overall depth; the actual depth is about 1 meter deeper. It has fallen far below the previous low of 25 centimeters in 2018.
As the Rhine can no longer function as a shipping lane, corporations that lost their transport routes were hit hard. Global chemical companies including BASF, INEOS Group Holdings S.A., and Covestro are located along the Rhine waterway. One-third of Europe's naphtha cracker (NCC) facilities procure feedstocks and ship products via the Rhine.
On the 11th, German chemical corporation Covestro declared force majeure to customers for some products and delivery contracts, citing the drop in the Rhine's water level. A force majeure declaration is a notice to the counterparty to avoid legal liability when contractual obligations cannot be fulfilled due to war, natural disasters, and the like.
This could work as a boon for Korea's chemical industry. When the Rhine's level dropped to 25 centimeters in 2018, Europe-produced volumes could not move along the river, disrupting global supply and demand for chemical products. At that time, global chemical product prices rose and domestic corporations benefited.
An official at the Korea Chemical Industry Council said, "Product prices surged then, and domestic chemical companies profited from exports," adding, "The price of TDI, a polyurethane intermediate, rose 15% in just two weeks at the time."
In the securities market, Hanwha Solutions and OCI, which produce TDI, a polyurethane feedstock, are cited as likely beneficiaries. Kumho Petrochemical, which makes MDI through its subsidiary Kumho Mitsui Chemical, TKG Huchems, which supplies TDI/MDI materials, Songwon Industrial, which makes antioxidants, Kukdo Chemical, which produces epoxy, and Lotte Fine Chemical are also mentioned as beneficiary corporations.
Jeon U-je of KB Securities said, "Since late July, the Rhine's falling water level has paralyzed European refining facilities, NCC, and specialty chemical logistics," adding, "As supply of specialty chemical products that had been improving tightens further, benefits are expected."
Lee Dong-uk of IBK Securities also said, "The drop in the Rhine's water level further worsens Europe's already tight supply and demand for chemical products," adding, "This year, scheduled maintenance and unplanned shutdowns at TDI and MDI facilities worldwide overlap, reducing actually purchasable volumes in Europe, which is expected to widen the in-region price premium and expand incentives for exports of Asia-made products to Europe."