German rail strikes disrupt oil product supply; inventories cushion price impact

According to S&P Global Commodity Insights, the strikes have complicated the delivery of oil products, leading to deferred deliveries, weak demand, and logistical challenges for refiners.

Rail strikes orchestrated by the German GDL train drivers' union from January 9 to 12 have caused significant disruptions in oil logistics across the country, particularly impacting refineries and supply chains. According to S&P Global Commodity Insights, the strikes have complicated the delivery of oil products, leading to deferred deliveries, weak demand, and logistical challenges for refiners.

Germany's reliance on railway freight for oil transportation makes the strikes a critical issue, as nearly all refineries in the country are landlocked. With railway transport contributing to around a fifth of total freight in 2021, the disruption affects various industrial segments, including oil.

The southern refineries, such as Gunvor's Ingolstadt and Shell's Rheinland refinery, along with Hamburg in the north and Gelsenkirchen in the west, have felt the brunt of the strikes. These refineries collectively account for a capacity of around 814,000 barrels per day (b/d). Schwedt and Bayernoil also faced challenges in obtaining products due to disrupted logistics.

Compounding the impact, farmers' strikes leading to tractors blocking highways have exacerbated the situation, hindering the transportation of goods and affecting diesel subsidies and tax breaks for farming vehicles. Deutsche Bahn, the largest rail freight operator in Germany, expressed efforts to prioritise "supply-relevant trains" to mitigate the strikes' impact. However, the strikes are expected to swiftly impact refinery operations, power plants, and steel producers, according to a Deutsche Bahn spokesperson.

While traders noted reduced services, translating to weak demand and deferred deliveries, the strikes are set to end on January 13. Ample inventory levels, however, have muted price responses across most segments.The impact of the rail strikes extends beyond oil products, affecting German petrochemical markets during a crucial restocking period.

Disrupted rail and road transportation have constrained availability, with difficulties in moving materials within Germany leading to delays in loading and transportation times. One intermediate chemicals producer noted, "Prices are moving up due to transport issues in Europe."

S&P Global Commodity Insights assessed cost, insurance, and freight (CIF) Amsterdam-Rotterdam-Antwerp (ARA) acrylonitrile at USD 1,220/mt on January 9, reflecting a USD 20/mt increase on the week. Seasonally high Rhine water levels have added to supply constraints, slowing barge transportation in Germany and the Netherlands.

The burst dyke in Maastricht on January 2 further limited water-bound deliveries across the Netherlands. Despite the resilience shown by markets during the strikes, further industrial action could introduce market volatility.

The Frankfurt Labour Court rejected Deutsche Bahn's request to prevent the GDL strike, and negotiations between GDL and DB have not yielded breakthroughs. Meanwhile, concessions to farmers' strikes may not be enough to avert further disruptions, leaving the possibility of extended strikes in the air.

The situation remains fluid, and industry participants are closely monitoring developments in the coming days. (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)