German rail strikes delay oil product supply, healthy inventories dim price response

Strikes by Germany's GDL train drivers' union targeting freight transport Jan. 9 – 12 have stalled oil product deliveries across the country, as skeleton timetables have complicated logistics for refiners.

With nearly all of the country's refineries landlocked, railway freight provides a vital artery for oil transported to both to inland markets and other European importers, such as Austria and Switzerland.

According to data from the German Federal Statistics Office, railway transport accounted for around a fifth of total freight transported in 2021, leaving oil and other industrial segments exposed to disruption.

Among the plants most affected are the country's southern refineries, including Gunvor's Ingolstat and Shell's Rheinland refinery in the south, Hamburg in the north and Gelsenkirchen in the West, with the five refineries together amounting to a capacity of around 814,000 b/d.

Sources also noted difficulty obtaining product from Schwedt and Bayernoil amid disrupted logistics on the week, exacerbated farmers strikes which saw convoys of tractors block highways to protest reduced diesel subsidies and tax breaks for farming vehicles.

A spokesperson from Deutsche Bahn, the country's largest rail freight operator, said the company was prioritizing "supply relevant trains" in its efforts to reduce the impact of the strikes, but noted that the industrial action would quickly impact the operations of refineries, power plants and steel producers.

Across product markets, traders noted that reduced services have translated to weak demand and deferred deliveries. Strikes are set to end Jan. 13. However, ample inventory levels have capped price responses across most segments.

One Hamburg-based marine fuel supplier noted significant exposure to the rail strikes, with railcar deliveries accounting for around 90% of the company's high sulfur fuel oil (HSFO) supply making up 70% of its sales.

Gasoil and LPG sources also confirmed that deliveries had been largely postponed to next week, keeping inland demand muted ahead of Jan. 15.

Inventory stockpiling was reported to have dimmed the impact of strike action on the week, while the GDL and farmers strikes will take a toll on demand.

"There will be no demand as farmers are not driving, so they are not burning anything and not resupplying, and trains are not going to their destinations," said one gasoil source.

Petchems bottlenecks

Disrupted rail and road transportation has also impacted German petrochemical markets, constraining availability during a key restocking period.

Sources noted difficulty in moving material within Germany due to the strikes, with both loading and transportation times delayed for imminent January deliveries.

"Prices are moving up [due to the] transport issues in Europe" one intermediate chemicals producer said, adding that "the rail strikes and road blockages put pressure on restocking demand and quantity coverage for our customers".

S&P Global Commodity Insights assessed CIF ARA acrylonitrile at $1,220/mt Jan. 9, up $20/mt on the week.

Sentiment within adjacent markets is also cautious, with deliveries into Germany expected to be impacted in the week ahead. One polymer recycler in Central Europe noted that while they were yet to see immediate impact due to generally poor demand, contingency plans were being developed to avoid disrupted distribution of January deals.

Supply constraints have been augmented by seasonally high Rhine water levels, which have slowed barge transportation in both Germany and the Netherlands and reduced access to prompt material. Dutch market players have been particularly exposed, with a burst dyke in Maastricht on Jan. 2 limiting water bound deliveries across the country in the first week of the year, according to market sources.

Further action in focus

While markets remained largely resilient to strikes on the week, further industrial action could invoke market volatility.

The Frankfurt Labor Court rejected a request by Deutsche Bahn this week to prevent the GDL strike action.

In late 2023 the GDL held strikes calling for higher pay and reduced working hours, though union boss Claus Weslsky told German media that strikes beyond 3-5 days would be avoided out of concerns for the economy.

Neither the GDL nor DB have reported any sign of breakthrough in negotiations on the week. Separately, government concessions to the farmers strikes appear not to have dimmed calls for a full U-turn on subsidy reductions, leaving the possibility of further disruption open.