By Nathan Allen 
 

Thyssenkrupp AG (TKA.XE) has become the latest victim of record low levels at Germany's River Rhine, which has hit other manufacturers that rely on the river to cool plants and transport goods and raw materials.

The river, which runs more than 1,200 kilometers from its source in Switzerland through Germany and the Netherlands into the North Sea, is at its lowest level since 2003, according to Adriaan van den Berg of Interrijn Group BV, which runs transport barges along the river. A combination of low rainfall in the Swiss Alps and higher-than-average temperatures has led to drought conditions for the past five months, he said.

Late Thursday, Thyssenkrupp cut its 2018 guidance for the second time since July, citing a range of issues across its divisions. While the focus was largely on provisions booked against an investigation into alleged price fixing, the group also cited transport issues.

"We believe production and shipping issues in Steel Europe likely accounted for over half of the hit, reflecting low water levels in the Rhine and reduced deliveries due to WLTP," Jefferies analyst Seth Rosenfeld said.

Carsten Riek at UBS said the division is likely to take a hit of between EUR50 million and EUR60 million after losing around 200,000 tons of shipments due to the lack of water.

In October, ArcelorMittal SA (MT.AE) declared force majeure on some material produced at its Duisburg site, which uses Thyssenkrupp-produced pig iron as a feedstock, due to low water levels.

The company didn't mention any financial impact but its broad geographic footprint is likely to dilute any adverse effects on group earnings.

Further down river, BASF SE (BAS.XE) has also had to cut production at its flagship Ludwigshafen cracker to around 60% capacity and has force majeure in place for 18 products.

During BASF's third-quarter analyst call, Chairman Martin Brudermuller said earnings at several divisions were held back by low water levels, which restricted raw-material supplies and reduced the availability of water for cooling.

"In addition, we faced higher transportation costs since we had to switch volumes from barges to other modes of transportation," he said.

A number of other chemical companies have been affected, including Belgium's Solvay SA (SOLB.BT), which said in August it might not be able to honor all orders on time due to "the persistent heat and drought" that lowered water levels.

 

Write to Nathan Allen at nathan.allen@dowjones.com

 

(END) Dow Jones Newswires

November 09, 2018 10:52 ET (15:52 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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