Reporter | Liu Zixiang
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From the dried reservoirs of the Iberian Peninsula to the falling water levels of the main arteries such as the Danube, an unprecedented drought is hitting the European continent.
More than half of Europe is being affected by extreme drought. On the latest map of the European Drought Observatory, 47 percent of the EU territory is in drought "warning" status and 17 percent is at the highest "alert" level. Across the English Channel, it has been almost raining in the south-east of England for nearly 150 days, with rainfall in the south being just 10% of the average in July. On Tuesday, britain issued an amber "extremely hot" warning.
France, Spain, Italy and the Netherlands are facing water shortages, and riverbeds across Europe are drying up. Water restrictions are largely in place throughout France, with more than 100 cities relying on trucks to provide drinking water. At the beginning of August, the average capacity of Spanish reservoirs was only 40%, well below the 10-year average of 60%. Some rural areas in the northeast of the country even have only 4 hours of drinking water left a day. The water level of the Bo River in Italy has fallen to its lowest level in 70 years and is not suitable for agricultural irrigation. The valley is home to 30 percent of Italy's agricultural production, and farmers have been forced to cut back on crop cultivation.
Western, Central and Southern Europe has not seen heavy rain for nearly two months, and drought is expected to continue. Andrea Toreti, a senior researcher at the European Drought Observatory, said Europe suffered an extreme drought in 2018, but this year's situation is even worse, the worst in 500 years. He expects drought risks in Western and Central Europe and the United Kingdom to remain high over the next three months.
Peter Hoffman, a meteorologist at the Potsdam Institute for Climate Impact Research in Germany, said that the drought in Europe is one of the consequences of climate change, and it is actually aggravated all year round, only in the summer when people feel it most.
Extreme droughts have had serious consequences for Trade Flows, Food Prices, Energy Security and more in Europe.
Supply chain losses
This historic drought is threatening European trade.
As the "economic lifeblood" of Europe, the rhine water evaporates severely, which has affected the transport of goods. The water level of the Rhine is currently at its lowest level since 2007, and some sections of the river are less than one meter deep, and most cargo ships cannot sail at full capacity. On August 10, the relevant departments predicted that in the early morning of the 12th, the water level of the Kaub section of the Rhine River may drop below 40 centimeters, and it will continue to decline in the next few days.
The Rhine, which originates in the Swiss Alps, is key to Europe's network of inland waterways. It flows over a thousand kilometers, passes through the industrial areas of Switzerland and Germany, and then joins the North Sea in the busy Port of Rotterdam in the Netherlands. According to Eurostat, the rivers and canals of the european continent carry an average of more than 1 tonne of cargo per EU resident per year. In terms of transportation functions alone, it contributes about $80 billion to the region's economy.
Moody's said in a study assessing damage to chemical producers along the Rhine that low water levels reduce barges' ability to transport raw materials and manufactured goods along the river, putting further pressure on supply chains.
This will weigh on the regional economy. Albert Jan Swart, a transportation economist at ABN Amro Bank NV, said the impact of the low Rhine water level was far worse than the €5 billion losses in 2018. According to the Kiel Institute for World Economic Research, the Rhine waterway problem pulled down Germany's GDP growth by about 0.4% in 2018.
Germany's energy supply is particularly dependent on the Rhine. The relevant companies have developed contingency plans. ThyssenKrupp, Germany's largest steelmaker, has set up a crisis group that meets daily. In order to smoothly transport LNG to the Ludwigshafen plant north of the Rhine, the German chemical company BASF has chartered a 110-meter barge.
The situation of the Danube, Europe's second-longest river, is also not optimistic. The Danube, which winds for 2,869 kilometres through Central Europe to the Black Sea, is an important channel for food and other trade and is currently facing blockages. The water level of the Danube near Budapest has dropped by 1.5 meters in the past three weeks. Much of Lake Wellens near Budapest has turned into a patch of dry mud that has caused the boat to run aground.
Gabriel Techera, director of investor relations at Transit Trade Services, Romania's largest inland waterway freight company, said he had never encountered such a serious situation in the past 20 years.
In order to deepen waterways and keep ships running smoothly, coastal countries Bulgaria, Romania and Serbia have begun urgently dredging sand.
A new food crisis
Drought affects Agricultural Harvests in Europe, and both EU staple and specialty food production have been affected.
In July, the European Commission's Joint Research Centre warned that yields in EU agriculture would fall due to hot and dry weather, with maize, sunflower and soybean production expected to fall by 8%-9%.
German farmers expect wheat production to fall by about 10 percent. In France, the world's fourth-largest wheat exporter, the Ministry of Agriculture expects production of soft and durum wheat to decline by 4 percent and 14 percent, respectively, compared to last year. Belgian farmers say crops such as potatoes and pulses are being affected. Romania, the world's leading corn exporter, said drought would cost up to 35 percent of production. In Italy, five regions in the north and central regions have declared a state of emergency, drought threatens rice cultivation, and farmers expect to lose 30 percent.
Specialties have also suffered a shock, especially olive oil in the south. Spain's agriculture minister, Luis Planas, said that if the country's olive harvest is affected, the price of vegetable oil, which has already been affected by the Russian-Ukrainian conflict, is expected to remain high. Europe's highly regarded wine industry is also facing difficulties, with high temperatures in Spain and France making grape production slower than usual.
According to CNIEL, livestock producers in France report that pastures are drying up, putting pressure on the production of milk, butter and cream. In eastern Hungary, honey production is also affected. According to the farm association Coldiretti, in the delta south of Venice, river disruptions cause algae to rot, reducing the oxygen on which clams and mussels depend.
Alessandro Farcioli, owner of a trawler in the Veneto region, said about 30 percent of the clam fishing operations in the region had been disrupted this summer and at least 2,300 local fishermen and workers could be unemployed.
Exacerbate the energy crisis
Extreme drought threatens water-based energy use, exacerbating Europe's energy crisis.
Too low water levels in rivers and lakes are endangering hydroelectric power plants. Glenn Rickson, S&P's head of global European power analysis, said hydroelectric power generation in Western Europe fell by 20 percent in the second quarter of this year compared to average.
In France and Spain, water levels in reservoirs in July were already at their lowest levels in more than 20 years. Spain has the largest number of dams per capita in Europe, and in August its national reservoirs stored only 40.4% of the reservoir capacity, seriously affecting the country's hydroelectric power generation. To protect reservoirs with low water levels, Norway in northern Europe is preparing to limit electricity exports.
Nuclear power plants have not been spared. France, an exporter of electricity, has the largest number of nuclear power plants in Europe. However, only about half of the country's nuclear reactors are now available. Because the Rhône and Garonne rivers are too hot to effectively cool nuclear reactors, this week, France's major power company EDF was forced to limit nuclear energy production. In Switzerland, one of the country's three nuclear power plants has also been forced to cut production.
Europe is grappling with a gas crisis and skyrocketing electricity prices, with droughts further exacerbating the crisis in the energy system. After the Russian-Ukrainian conflict, natural gas from Russia has been drastically reduced, and Germany has restarted a number of coal-fired power plants. Up to 40 million tonnes of coal are expected to be transported through the Rhine this year, but the German Transport and Logistics Association estimates that only 65 percent of the plan will be completed.
Energy company Uniper revealed that the output of the two coal-fired power plants will be affected by supply problems along the Rhine. Last week, chemical giant BASF said it could not rule out a reduction in production due to soaring freight rates. Switzerland relies on the Rhine for most of its oil, and fuel costs have now increased.
"Persistent heat, along with wildfires, shrinking rivers and rising land temperatures that can be observed from space, has undoubtedly taken a toll on agriculture and other industries. In the face of economic losses caused by heat waves and droughts, Europe's energy crisis is a no-brainer, with far fewer impacts. Josef Aschbacher, director-general of the European Space Agency, said.