Shell Refinery Closure, Low Water Levels Drive Up Freight Costs on the Rhine

The shutdown of Shell’s 147,000 barrels per day Wesseling refinery, coupled with a power unit failure at the Miro refinery, has intensified demand for oil product barges on the Rhine this week. However, low water levels have significantly increased freight rates.

Heating oil prices in the Cologne region have been on the rise since mid-March, as Shell has turned to barge imports to supply the area following the suspension of crude processing at Wesseling.

At the same time, buyers are increasingly shifting to alternative loading points in neighbouring areas, leading to a surge in product sales at several tank farms along the Rhine and Main rivers. This has driven up demand for barges to facilitate resupply, according to shipping operators.

The 310,000 bpd Miro refinery in Karlsruhe has also seen increased barge demand after a power plant failure on 18 March temporarily impacted production.

Market players have been transporting more naphtha by barge towards Amsterdam-Rotterdam-Antwerp (ARA) and other inland locations, while demand for oil product deliveries to the refinery has also risen.

The combination of low Rhine water levels and heightened barge demand towards the end of the week ending 23 March has driven freight rates higher, particularly along the Main and upper Rhine.

Over the weekend, water levels at Kaub dropped to 1.10 metres, reducing loading capacity by more than half. As a result, more barges are required to transport the same volume of product, and shippers anticipate further freight rate increases this week.