Germany’s low water crisis shows how climate shocks reshape supply chains

“Even temporary disruptions can have lasting effects on firms’ sourcing strategies,” says Saskia Meuchelböck, researcher at Aarhus University and author of the study Navigating Supply Chain Disruptions: How Firms Respond to Low Water Levels. “The assumption that companies simply return to business as usual once conditions normalize does not hold in practice. We see that short-lived climate shocks can create lasting path dependencies in supply chains.”

Using the unprecedented low water levels of Germany’s inland waterways in 2018 as a natural experiment—and a critical stress test—the study examines how companies dependent on inland shipping adapt when drought conditions leave the Rhine and other key European rivers critically low, disrupting important freight routes.

Inland waterways are central to moving bulk commodities such as coal, ores, and chemicals, and their disruption poses significant challenges to production systems. By linking monthly German trade data with transport information, the study explores how temporary shocks ripple through firms’ operations. Key findings include:

• Severe disruptions of inland shipping: Goods transport on inland waterways declined sharply during the low water period, with exports falling by nearly 20 percent and imports by 12 percent.
• Supply-side constraints: Firms relying on inland shipping for imports saw exports decline by around 4 percent—regardless of how those exports were transported. Firms with fewer logistics alternatives were hit hardest.
• Persistent adjustments: Even after water levels returned to normal, firms continued to avoid inland shipping, switching instead to rail and road transport. This shift was most pronounced for time-sensitive goods, such as intermediate inputs like chemicals, and non-durables like foodstuffs.

The findings carry broader implications. Inland waterways are considered cost-efficient and low-emission, forming a key part of Europe’s decarbonisation strategy. Yet the study underscores their vulnerability to climate change, as extreme weather events become more frequent and severe.

“Transport infrastructure is a critical but fragile backbone of our supply chains,” Meuchelböck concludes. “As climate change reshapes operating conditions, resilience will require not just supplier diversification but also diversification across transport modes. This can increase traffic in some places. Building resilience will require both diversified logistics strategies by firms and investments in climate-adaptive infrastructure by firms and policymakers—carefully balancing climate mitigation goals with the need to secure transport systems against climate-induced vulnerabilities.”

Navigating Supply Chain Disruptions: How Firms Respond to Low Water Levels

About RETHINK-GSC

The project ‘Rethinking Global Supply Chains: Measurement, Impact and Policy’ (RETHINK-GSC) captures the impact of knowledge flows and service inputs in Global Supply Chains (GSCs). Researchers from 11 institutes are applying their broad expertise in a multidisciplinary approach, developing new methodologies, and using innovative techniques to analyse, measure, and quantify the increasing importance of intangibles in global supply chains and to provide new insights into current and expected changes in global production processes.