Rail routes linking European ports with German power plants are operating at full capacity, as low river levels impede barge deliveries, driving up coal prices for end users.

The coal and freight analyst with a large German utility told Montel said that “Companies without long-term contracts are suffering, as they have to pay a large premium for moving coal from Rotterdam to power plants.”

He said that “Rail capacity is at its limit, so spot buyers will have to pay quite a chunk [for river deliveries], in addition to the API 2 price.” The front month API 2 contract last traded at USD 123.80 per tonne up USD 0.05 per tonne on the previous session’s close. But German coal importers also have to pay barge operators a low water premium, which increases as water levels fall. Water levels on sections of the Rhine a key inland transport route for coal are more than 50% below average.

Meanwhile, DB Schenker the freight logistics subsidiary of German national rail company Deutsche Bahn confirmed there were limitations to rail capacity.

A company spokesman Marek Polster said that “In some industries, there is increased demand due to the low water levels. These industries are under review, but it is too early to give a statement.”

However, for most utilities, the supply situation is not so serious, as they can dip into power station stockpiles. The analyst said that “For the moment, there is lots of wind and solar, so there are still stocks at the plants.”

(Sourced from Montelmedia)