Rhine drought brings supply chain and force majeure risks to the fore

Andreas Haak and Laura Ayre of Pinsent Masons said the prolonged period of hot, dry, weather that has hit Europe this summer should spur the action, highlighting how it is the latest example of climate change impacting business operations and supply chains.

One example of this has arisen from low water levels on the River Rhine.

The Rhine is an important economic artery for manufacturing businesses in central Europe, linking major seaports like Rotterdam and inland ports like Duisburg in Germany – a key gateway to the European hinterland – with manufacturing sites along the banks of the Rhine. Pharmaceutical companies such as Bayer, Boehringer Ingelheim, Roche and Novartis are among those to operate such sites, as do chemicals manufacturers Covestro, Lanxess, Henkel and BASF.

The water level measured at the Kaub gauging station, which sits on the Rhine between the cities of Mainz to the west and Koblenz to the north, fell to just seven centimetres on Monday 17 August. The water level measured at Kaub on Thursday 20 August had risen from Monday’s low to 36cm.

The readings at Kaub do not reflect the actual depth of the Rhine at that point – the river is around one metre deeper – but they are viewed as an important benchmark for whether goods and materials can be transported, and at what weight of cargo per vessel, via the Rhine in that region of Germany.

Research conducted by the Kiel Institute for the World Economy, published in 2023, found that where water level measured at Kaub sits lower than 78cm for 30 days, industrial production in Germany declines by about 1%. According to the University of Warwick, the water levels at Kaub last reached those levels on 22 July.

For some businesses, the effect of the low water levels and associated reduced capacity of the Rhine for transporting raw materials and finished goods has been to make alternative logistics arrangements, such as by shipping via road or rail. However, Haak said the substantial volumes carried by barges cannot always be readily substituted by alternative transport modes. While several German federal states have sought to mitigate the impact of low water levels by permitting exemptions from Sunday truck driving restrictions, thereby facilitating a temporary shift of freight to road transport, businesses may nevertheless face capacity constraints and increased logistics costs, he said.

Specific details of how chemicals manufacturer BASF has been addressing the low Rhine water levels were shared by the company’s senior management during calls with investors and the media on 29 July, when the company published its financial report for the first half of 2026.

Markus Kamieth, BASF chairman and chief executive, said the company is “much better prepared” for the low Rhine water levels than it had been in 2018, when a prolonged drought last hit its operations at its Ludwigshafen manufacturing site. He said the company can deploy “specialised ships” capable of carrying goods via the Rhine “at very, very low water levels” and that it also other contingency measures in place too, including the ability to change “the mode of transport” for shipping. Dirk Elvermann, BASF’s chief financial officer, said “logistics cost will increase in such a situation”.

Asked specifically by one analyst as to whether the situation on the Rhine could cause the company to trigger force majeure clauses in its commercial contracts, Kamieth did not rule it out.

Kamieth said: “It would not be wise to now exclude that there will be force majeure announcements or, let's say, product shortages in individual cases. Because … Ludwigshafen and also other chemical factories along the River Rhine, BASF is not the only one, and on other rivers, probably in Europe, have very complex Verbund structures [operations and production systems] and value chains and so forth. Sometimes it's only one raw material that's missing, and then you have some ripple effects. This all puts a lot of stress on the system.”

“It's complicated, and it puts a lot of pressure on planning, on supply chain, and I don't want to rule out customer impacts and things where BASF will have to go out and say we have to curtail certain products. This could all happen in the next weeks, but from a financial impact, everything that we're seeing so far doesn't make us too nervous, and I think our teams have it very well under control and are mitigating these effects on a constant basis,” he added.

Ayre said disruptions to the production or transportation of chemicals could result in delays, shortages, increased costs and contractual disputes across Europe. They urged manufacturers dependent on such inputs to review their supply chains, to identify dependencies on Rhine-linked suppliers and logistics routes and recommended an additional review of commercial agreements – and of force majeure, change in law, delay, hardship, allocation and supply interruption provisions specifically – together with some contingency planning around alternative sourcing.

“The renewed concerns surrounding water levels on the Rhine highlight how climate-related events are increasingly becoming supply chain risks rather than purely operational challenges,” said Haak.

“The recurring challenges on the Rhine demonstrate that supply chain resilience is about more than contractual protections and alternative sourcing strategies. Businesses that understand their exposure to key transport routes are generally better placed to manage disruption and meet their contractual obligations. The current situation is also likely to add momentum to the ongoing debate in Germany about infrastructure resilience and the need for continued public investment in the maintenance and expansion of critical transport infrastructure, including the Rhine fairway itself. At the same time, German industry is facing a range of other supply chain bottlenecks, from ageing bridge infrastructure to extensive construction works across the rail network,” he said.

Ayre added: “Organisations should be reviewing contractual risk allocation now rather than waiting for disruptions to materialise. Particular attention should be paid to force majeure clauses, notification requirements, mitigation obligations, allocation rights and liability provisions. Businesses may also wish to assess supply chain resilience, inventory strategies and alternative sourcing options.”

Life sciences expert Sarah Taylor of Pinsent Masons has highlighted that, beyond contractual risks, extreme weather events, like this summer’s European heatwave and drought, pose regulatory and commercial risks for pharmaceutical manufacturers.