Hunger Stones: A 700 Year-Old Profit Warning

Environmental Risks, Risk
Throughout human history, the economy and the environment have been inexorably linked.

Hunger Stones

In Central Europe, people beginning in the 1100's have marked droughts by carving warnings and dates on rocks in the Rhine, Elba, and other major rivers.  These rocks are known as “hunger stones”.  Like ghosts from the past, these stones and their warnings are being revealed as a record European drought combined with record heat reduces water levels to all-time recorded lows.[1] Some of the hunger stones’ messages include: “If you see me, weep”; “If you will again see this stone, so you will weep, so shallow the water was in the year 1417”; “Who once saw me, he cried.  Whoever sees me now will cry;” and “When this stone sinks, life will become more colorful again”.[2], [3] These haunting messages serve as profit warnings for modern day investors from medieval times. Throughout human history, the economy and the environment have been inexorably linked. The Bible has many stories of droughts, floods, plagues, and other environmental ills that were visited upon the people and their economies.  At the same time, the Bible spoke of ideal environmental conditions as the promised land “flowing with milk and honey”.[4] Humans have settled near big rivers and deep-water ports the world over to take advantage of their ease of transportation of inputs and outputs as well as human capital.  Indeed, almost every major city in the world is adjacent to a large river. As the hunger stones reveal warnings from before the Renaissance, investors would be wise to heed them. Climate change is threatening these historic facilitators of trade and the companies that depend on them.

The Rhine and the Economy

The Rhine has been a thoroughfare of trade since at least Roman times and remains a cost-efficient way to transport inputs to Switzerland and the heart of industrial Germany and finished goods back out to the North Sea and the rest of the world.In 2017, 186 million tons of goods were shipped on the Rhine between Basel and the German-Dutch border, about half of all European river shipping.[5] That is now being seriously disrupted.The Rhine has reached record low levels of one foot at key industrial cities including Stuttgart and Mannheim.[6] The Elbe is also experiencing extremely low water levels. While the drought has increased costs and reduced profits in Germany, it raises serious questions about the viability of European infrastructure. "Though rail cars and trucks are often considered an alternative to barge shipments along the Rhine, possible capacities appear to have been reached," S&P said.[7] In essence, this means that rail and trucks can’t pick up the additional 186 million tons of freight traditionally moved over the Rhine, or even a meaningful fraction of it. Because of this, the cost of barges has risen from $4-5 per metric ton to more than $40, costs that will almost certainly be passed on to consumers.[8] The price of heating oil has also increased in areas along the Rhine due to the dearth of supply and increased shipping costs.


Perhaps the most heavily exposed company to the drought is BASF, one of the world's largest chemicals companies.In a press release dated August 6, 2018, BASF stated:[9]

Due to the persistent high temperatures and low water levels in the Rhine, BASF SE has to adjust production and logistics at its Ludwigshafen site.The amount of water withdrawn from the Rhine e.g. for cooling purposes is limited by the authorities; in addition, the re-entry temperature of the cooling water is limited to a certain temperature. To meet these requirements, BASF must gradually adjust production at its Ludwigshafen site.Moreover, if the water level continues to fall, goods can only be transported over the Rhine to a limited extent. At present - despite the low water level in the Rhine - inland waterway transport can still be maintained through the use of a larger number of vessels. In view of the weather and water level forecasts, BASF is preparing to shift to alternative modes of transport in consultation with its customers.In individual cases, delivery bottlenecks may occur if the current weather situation persists. BASF is in close contact with its customers in this respect.

In their third quarter earnings report, BASF experienced a 23 percent decline in EBIT before special items.  The call noted:

... production in Ludwigshafen, Germany, was affected by the low water levels on the Rhine River. EBIT before special items decreased considerably, mainly due to higher fixed costs... The low water levels on the Rhine River and the significant increase in raw materials prices also contributed to the decline in earnings.

Although not entirely due to the reduced production in Ludwigshafen, the drought has contributed significantly to the decline in BASF’s stock price.

Chart 1: BASF Stock Price[10]

bantam inc jack duval multi-family office manhattan ultra-high net worth - basf chart

Second Order and Long-Term Effects

The German government released strategic fuel reserves because oil shipments have been so disrupted. This is only the fourth time in 40 years the German government has taken such measures.[11] If the drought and heat conditions become the new normal in Europe, it will significantly reduce output and profits. As discussed in my environmental risk blog post series, investors must build portfolios that are environmentally resilient. Something most investors, and their advisors, are not doing.

[1] Wikipedia; s.v. “hunger stone”;  Available at:; Accessed December 19, 2018.

[2] Peter Dockrill; Science Alert; Sinister ‘Hunger Stones” With Dire Warnings Have Been Surfacing in Europe; August 27, 2018; Available at:; Accessed December 20, 2018.

[3] Id.

[4] Bible; Exodus 3:17; Available at:; Accessed December 19, 2018.

[5]; Germany’s iconic Rhine River is at a record low, bringing businesses and boats to a standstill; October 24, 2018; Available at:; Accessed December 19, 2018.

[6] Michael Agnell; Freight Waves; Low water levels on Rhine add to ‘tipping point’ facing Europe’s truck markets; November 9, 2018; Available at:; Accessed December 19, 2018.

[7] David Sheppard and Guy Chazan; Financial Times; Rhine drought leaves Europe’s industry high and dry; October 24, 2018; Available at:; Accessed December 19, 2018.

[8] David Sheppard and Guy Chazan; OZY; Where Did the Rhine Go? Drought-Hit Cargo River Sparks Economic Fears; November 2, 2018; Available at:; Accessed December 19, 2018.

[9] Florian Tholey; BASF; Heat and drought: A challenge for production and logistics at the Ludwigshafen site; August 6, 2018; Available at:; Accessed December 19, 2018.

[10] Bloomberg.

[11] PHYS ORG; Drought-hit Rhine forces Germany to tap oil reserves; October 26, 2018; Available at:; Accessed December 19, 2018.

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