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| European steel and aluminium scrap markets |
Europe’s scrap metal recycling sector faces a severe logistics crisis as low water levels on the Rhine restrict inland waterway transport. This disruption creates significant pressure on delivery capacity despite generally softer scrap prices.
The Logistics Bottleneck
Water levels at the critical Kaub gauge have fallen to 25cm, forcing barges to operate at a fraction of their capacity. Consequently, freight rates on affected routes have tripled since late June, with spot rates exceeding €100 per tonne. While steel mills and remelters seek alternative rail and road transport, infrastructure maintenance and driver shortages hinder these efforts. Thus, the logistics squeeze now acts as the primary constraint on the physical trade of scrap.
Impact on Scrap Prices and Market Sentiment
Fastmarkets reports that domestic shredded scrap prices in Germany softened in July, reflecting weak underlying demand. Secondary aluminium producers currently struggle with razor-thin margins as freight surcharges erode their competitive advantage over primary metal. Although demand remains weak due to summer maintenance, the scrap metal recycling industry fears a supply crunch in September. If river levels remain low, the inability to physically move material will tighten availability, potentially counteracting the recent price softening.
ScrapInsight Commentary
Low reservoir levels on the Rhine are not merely a factor that increases transportation costs, but a serious variable that causes “physical isolation” within the supply chain. If the transportation bottleneck is not resolved when the plant resumes operations in September, a paradoxical situation may arise where, despite falling prices, supply-side price increases occur due to a shortage of available stock.
