Droughts across Europe are exacerbating construction materials shortages by shrinking waterways used for barge transport, warns Dutch bank ING.
It said the last time low water levels hurt business was in 2018. That was when drought shaved 0.3% off German GDP growth over two quarters.
“Back in 2018, the low water period only came in late September. Now, low water levels have come earlier and there is little rain relief in sight,” it said in a 2 September analysis.
“This drives up transport costs as barges are only able to sail with fewer materials, with the rest having to be transported by truck. This is on top of already high input prices, for instance, energy prices.”
The bank didn’t quantify the cost implications of the latest drought. But it said that 23% of EU construction companies reported production problems in August owing to materials shortages.
That’s down from 29% in April but it’s “still at a historic sky-high level”, ING said.
Now that supply chain disruptions caused by the Covid lockdowns in China are slowly abating, drought is “a new hurdle”, it added.
According to the European Drought Observatory, 64% of European Union territory is under drought warning or alert conditions.
The observatory said Europe has been experiencing a severe-to-extreme drought since the beginning of 2022, with forecasts for the coming months still pointing to drier-than-normal conditions.