The extreme heat made Germany's Rhine River too dry and threatened to become land. Not only that, the dryness of the Rhine River also disrupts supply chain routes and creates more problems for the economy.
"Water on the Rhine River has dwindled to 'very low' levels in some areas, disrupting shipping on Germany's most important inland waterway," a German official said.
The lack of rainfall in recent months meant that cargo ships could only carry lighter loads. As a derivative impact, transportation costs soar, and there is a risk that the economy and electricity supply will deteriorate.
Last month, Germany's Federal Institute of Hydrology warned that water flow at the Kaub gauge, located west of Frankfurt, was already at 45% of the average level for this time of year. Now, water levels are expected to drop further before rising 'very slightly' in the coming weeks.
A number of Deutsche Bank economists say this situation is reminiscent of 2018, when a similar problem with the river caused a halt in shipments of goods and reduced Germany's economic growth by about 0.2%.
"Although this year's water level has not dropped to the same level, cargo ships have had to reduce the number of loadings. Therefore, transportation is becoming more expensive," they wrote in a report last week.
Analysts warn the drought could exacerbate a bigger crisis for Germany, which is already at risk of a recession due to an energy crisis, high inflation and supply chain bottlenecks.
Recently, Germany was forced to turn on its coal-fired power plants to ensure that the country still has access to electricity as Russia restricts gas supplies.
However, much of the coal needed is transported from the Dutch ports of Amsterdam, Rotterdam and Antwerp by barge along the Rhine, placing additional pressure on freight capacity there.
"The lowering of river water levels is challenging energy product shipments, which worsens the commodity supply situation in Europe. The Rhine is also important for transporting chemicals and grain," said Henri Patricot, an oil analyst at UBS.
"This problem could be exacerbated if the water level decline persists into December. This could reduce 0.2% of GDP in the second half of the year, and add a touch to inflation," wrote chief European economist Andrew Kenningham.
Germany's all-important manufacturing sector could be hit harder. Researchers at the Kiel Institute for the World Economy have previously found that within one month of low Rhine River water levels, the country's industrial output could fall by about 1%.
Most of Europe is currently being hit by an extreme heat wave and drought. Not only the Rhine River, London's iconic Thames River is also drying up and moving about 7.5 km downstream.
In addition, high river temperatures in France have hampered the operation of several nuclear power plants. In northern Italy, farmers are facing the worst drought in 70 years, impacting crop production from soybeans to parmesan.