Market environment is gradually recovering
Demand for mobility remains restrained, demand for freight transport recovers
The Covid-19 pandemic continued to dominate public life in Europe in the first half of 2021. Due to further waves of infection, authorities have once again issued restrictions on personal contact and curfews, as well as business closures, in order to limit the number of infections and to prevent the health systems from becoming overburdened. Compared with spring 2020, however, measures were limited in many places to targeted measures affecting contact-intensive services. In contrast, the production of goods was almost unhindered.
Accordingly, our environmental conditions have developed differently. For example, the demand for mobility remained significantly below pre-Covid-19 levels. However, a slow recovery began with the first loosening of restrictions in early summer. This recovery had already started in freight transport much earlier. The high demand for consumer goods and capital goods in Asia and the USA revived both local and European industrial production. As a result, transport demand has increased globally and in Europe, improving the environment for DB Group.
Recovery in the major economic regions is varying
The global economy has been on a recovery path since the summer of 2020, but this recovery is taking place at different rates depending on the economic region and on the extent and severity of the Covid-19 pandemic in that region. In China and large parts of Asia, economic output was once again at pre-Covid-19 levels in 2020 and grew strongly again in the first half of 2021. A significant upturn has also begun in the USA and North America as a whole, with a rising vaccine ratio and extensive government spending programs.
Global trade in goods also benefited from the high demand in these regions, which, despite some one-off effects such as the blocking of the Suez Canal or the Covid-19 outbreak in several Asian ports, exceeded the level of 2019.
In Europe, however, the continued recovery of the economy has been delayed in view of the high number of infections in winter 2020 and spring 2021. In view of high global demand, the industry already has full order books again, but production itself has been repeatedly limited by supply bottlenecks in various sectors.
In the services sector, the revival of economic activity did not start until the measures to contain the Covid-19 pandemic slowly came to an end in early summer 2021. The spending and short-time work programs in many countries, which, for example, were able to prevent a sharp rise in unemployment, continued to provide support.
This supportive effect applies in particular to Germany, where solid public finances have made comparatively high financial aid and investment possible. Germany is also benefiting from the global upswing more than most due to the significant role that the industrial sector plays in the overall economy. Economic output nevertheless only grew slightly in the first half of 2021, as losses in the first quarter and gains in the second quarter almost canceled each other out.
Energy markets
The central hedging policy of DB Group aims to minimize energy price fluctuations. Our activities are therefore not exposed to the full impact of changes in market prices, at least not in the short term.
Brent crude (USD/bbl) | H 1 2021 | 2020 | Change | |
absolute | % | |||
| Average price | 65.2 | 43.2 | +22.0 | +50.9 |
| Highest price | 76.6 | 71.8 | – | – |
| Lowest price | 50.6 | 16.0 | – | – |
| Final price as of Jun 30/Dec 31 | 75.1 | 51.8 | +23.3 | +45.0 |
Source: Thomson Reuters
In the first half of 2021, the price of oil increased by about 50% on a dollar basis compared to the same period in the previous year. For the Eurozone, this development was proportionally cushioned by a stronger euro.
Fuel prices in Germany, in addition to the increase in oil prices, were also driven by the addition of a CO₂ tax, and by the end of May 2021 these were about 15% above the corresponding previous year’s figure.
While generally rising fuel prices strengthen the competitive situation of railways compared to cars, in view of the Covid-19 restrictions in the first half of 2021, fuel price development was of minor importance for passengers’ choice of transport mode in rail passenger transport. In contrast, the increase in diesel prices is likely to have at least contributed to the comparatively positive development in rail freight transport. However, rising fuel prices had a negative impact on land transport at DB Schenker and the bus business.
H 1 2021 | 2020 | Change | ||
absolute | % | |||
BASE LOAD POWER | ||||
| Average price | 58.0 | 40.5 | +17.5 | +43.2 |
| Highest price | 72.4 | 50.0 | – | – |
| Lowest price | 48.7 | 33.9 | – | – |
| Final price as of Jun 30/Dec 31 | 72.4 | 50.0 | +22.4 | +44.8 |
EMISSIONS CERTIFICATES (€/T CO₂) 2) | ||||
| Average price | 44.0 | 24.8 | +19.2 | +77.4 |
| Highest price | 56.9 | 33.5 | – | – |
| Lowest price | 31.3 | 14.3 | – | – |
| Final price as of Jun 30/Dec 31 | 56.4 | 32.7 | +23.7 | +72.5 |
Source: Thomson Reuters
The data for the first half of 2021 and for the year 2020 are based on information and estimates available as of July 2021.
1) In Germany.
2) Europe-wide emissions trading (EU-ETS).
Prices on the futures market for electricity rose significantly in the first half of 2021. The most important price drivers were the prices for emissions allowances (EUA under the European emissions trading system) and the price increase for natural gas. In DB Group’s operating business our hedging activities had a dampening effect.