With the Danube in Disrepair, European Businesses are Desperate for Alternatives

(Bloomberg) — European Union plans for a trade artery between the Black and North seas have stalled as an upgrade of the Danube waterway is held up by spats over funding, the environment and immigration, delaying work that would reduce transport costs for companies spanning BASF SE to Ford Motor Co.

The bickering has stymied moves to upgrade infrastructure and reverse a drop in water levels in the lower Danube, while comments from right-leaning Dutch politicians have upset plans for Rotterdam port to help modernize Romania’s biggest harbor.

Goods volumes on Europe’s longest river after the Volga are 80 percent lower than on the Rhine, the region’s busiest waterway, according to EU figures. About 45 million metric tons of cargo was transported last year, half the total moved before the disintegration of the Soviet bloc, said Manfred Seitz, director of Vienna-based lobby group Pro Danube International.

“Businesses are desperate,” said Karin de Schepper, general secretary at Inland Navigation Europe in Brussels, which promotes waterborne trade. “They’d like to use the Danube but they can’t so they’re looking at alternatives.”

Rising in the Black Forest in western Germany, the Danube — dubbed “blue” by Viennese composer Johann Strauss in his 1866 waltz — flows for more than 1,750 miles (2,800 kilometers) through 10 European countries. Its catchment area covers one- fifth of the EU and has a population in excess of 100 million.

Canal Link

The river is also central to European Commission plans to create a new route from Asia to northwest Europe by utilizing the 106-mile canal between the German cities of Kelheim on the Danube and Bamberg on the Main — the Rhine’s biggest tributary — finished in 1992. The route would shave 2,100 miles from the standard sea passage via the Mediterranean and eastern Atlantic.

Even over the same distances, shipping by barge can be six times cheaper than road and three times less costly than rail, according to U.K. risk adviser Infospectrum Ltd. BASF, the world’s biggest chemical company, uses the Rhine for shipments from production sites located along the river’s banks in Germany, spokeswoman Ursula von Stetten said.

Yet parts of a Danube, described by Napoleon Bonaparte as the “king of rivers,” verge on the unnavigable, with an absence of regular dredging resulting in some stretches becoming too shallow to pass, especially during periods of drought.

Theft

Seven sections regularly fall below the 2.5 meters (8.2 feet) of draught required of an “international waterway” as defined by the United Nations Economic Commission, according to the Budapest-based Danube Commission. Navigation on the lower river was impossible for more than 38 days in September and October last year because of insufficient water levels, according to the European Commission, the EU’s executive arm.

Vienna-based Helogistics Holdings GmbH, a subsidiary of Swiss iron ore producer Ferrexpo Plc, halted shipments between Constantza, Romania’s No. 1 port, and Budapest in March, saying that shallow waters had made operations “almost impossible.”

Lack of clearance means barges are frequently loaded to only 50 percent of capacity to ensure a smooth passage, driving up costs and delaying deliveries, said Jurgen Sorgenfrei, a consultant on maritime and hinterland issues at IHS Global GmbH.

The disruption has led to a higher incidence of theft from barges forced to tie up along the river and at its ports, according to Edgar Martin, director for central and eastern Europe at London-based Infospectrum.

“Cargo ends up waiting at locks and gets stolen,” said Frankfurt-based Sorgenfrei. “The captain wakes up next morning and some of the containers are open.”

Low-End Goods

Timetabling and security concerns mean the Danube is rarely used to move high-value goods, with traffic generally made up of less time sensitive bulk commodities, he said.

Ford, the second-biggest U.S. automaker, once used barges to transport autos made at its Craiova plant in Romania — where the B-Max model is currently produced — but has ceased to do so, spokesman Adrian Schmitz said from the company’s European headquarters in Cologne, Germany. Renault’s Romanian Dacia no- frills brand has also ceased to move cars on the river.

Cargo flows at Constantza, a Black Sea staging post linked to the Danube by a 40-mile canal that allows vessels to avoid shallow delta channels, reveal the low-value nature of goods.

Port data shows that 11.5 million tons of cereals and seed passed through in 2011, equal to one-quarter of overall volumes. Containers at terminals including one operated by Dubai’s DP World Ltd. comprised 14 percent of traffic, half the level at Rotterdam, Europe’s top port. Perishables such as fruit and vegetables amounted to 61,000 tons, 0.1 percent of the total.

Sole Shipment

The picture is even bleaker at Galati, the largest Romanian port directly on the Danube, where 70 percent of shipments come from the local unit of ArcelorMittal, the No. 1 steelmaker. In the last 20 years Galati has handled only one consignment of food or beverages, and its container terminal is unused, said Carmen Costache, president of the Romanian Inland Ports Union.

Constantza, at least, is well placed to become “one of Europe’s biggest ports,” General Manager Decebal Serban said by e-mail, with the facility acting as an entrepot for southeast Europe just as Rotterdam does further the north. Frustrating that potential is a general lack of intermodal infrastructure that would allow the smooth transfer of containerized goods between ships, trucks and railway wagons, he said.

Diplomatic Fallout

Investment in the Danube appears adequate, with 700 million euros ($904 million) from EU structural funds designated for its development through the end of 2013 and the budget for 2014-2020 currently being negotiated. Cash from the bloc’s wider TEN-T infrastructure program, which aims to create transport corridors across Europe, totals 8 billion euros through next year and a proposed 32 billion euros for 2014-2020.

Yet wrangling over budgets, work commitments and national interests means projects are proceeding slowly at best. Slovakia and Hungary were found by the International Court of Justice to have committed “wrongful acts” in seeking to divert as much as 97 percent of the Danube’s flow to rival power plants, while in Germany environmental pressure groups have frustrated plans to deepen a section of the river through damming since the 1970s.

A deal according to which Rotterdam last year agreed to lend management expertise to Constantza faltered following a diplomatic spat after the Netherlands objected to Romania joining the Schengen travel area. Dutch Freedom Party leader Geert Wilders, then a member of the ruling coalition, also set up a website inviting complaints about East European migrants, prompting Romanian politicians to promote a trade boycott.

Efforts will be made to start talks with the new government and Constantza authorities via the Dutch embassy in Bucharest, Port of Rotterdam spokesman Tie Schellekens said in an e-mailed statement, adding that there is “much support” for the plan.

Without investment and infrastructure upgrades, the Danube may never get the chance to fulfill its potential as other modes of transport capture freight flows on a permanent basis.

“The trucking industry is very flexible and very aggressive,” IHS’s Sorgenfrei said. “A lot of the stuff that was once carried on the river today goes by road.”