by Malte Humpert Part 1 of this series provided an overview of the Northern Sea Route (NSR). Part 2 will discuss the growing economic activity in the Arctic which invites questions about the medium- and long-term prospects of shipping along the NSR. Do Arctic shipping routes, especially the NSR, represent a commercially viable alternative to traditional shipping routes? What are the crucial variables in predicting the future of Arctic shipping? Part 2 looks at global trade dynamics and explains if the NSR would be compatible with world trade patterns.
The NSR represents a shortcut for the transfer of goods between Europe and Asia and thus offers significant cost savings for shipping companies. In theory, distance savings along the NSR can be as high as 50% compared to the currently used shipping lanes via Suez or Panama. Whereas a voyage from Japan to Europe takes roughly 29 days via the Cape of Good Hope and 22 days via the Suez Canal, it takes just 10 days via the Arctic Ocean.[1] The actual sailing distance between Yokohama in Japan to Rotterdam in the Netherlands is roughly 20,000 kilometers passing through the Suez Canal, but less than 9,000 kilometers via the NSR.
Over the past decade, Asia has overtaken North America as the largest market for European exports and the doubling of world trade by 2020 will further increase the importance of shipping lanes.[2] The attractiveness of the NSR as a shorter connection between Europe and Asia may increase further as container ship operators adopt “super-slow steaming” in order to reduce fuel consumption and costs.[3]
The majority of cargo ships that ply the world’s oceans operate on regular schedules, called liner service. In total more than 6,000 ships, most of them container ships, follow a set route calling at a number of ports to load and unload cargo. The global maritime industry operates on just-in-time cargo deliveries. The ability to schedule journeys long-time in advance and to guarantee uninterrupted service are key for container ship operators.
The lack of schedule reliability along Arctic shipping routes represents a major obstacle to developing the NSR. The Arctic Ocean off the coast of Northern Russia may be ice free anywhere from late June until November. During some years the ice recedes early during the season and does not return until late into Fall, while in other years the ice-free period may be as short as six weeks. Simply put, there are no guarantees when ice-free conditions start or end. In addition, throughout the summer drift ice originating further north is likely to be pushed into the shipping lanes by wind and ocean currents. Even during the summer months Arctic weather remains unstable. Fog, poor visibility, and violent winds may interrupt the pace of regular liner services.
Between Murmansk and the Bering Strait the NSR passes along 2500 miles of nearly uninhabited Siberian tundra. The lack of infrastructure and suitable ports along the route renders ships unable to receive timely assistance in case of mechanical breakdowns or damage. Operating in such remote regions under harsh climatic conditions naturally translates into higher insurance premiums for cargo ship operators.
The world’s major container lines optimize their routes along a network of ports that offer developed communication lines into the hinterlands, e.g. river transport and railroads, to distribute goods to customers and consumers. As the NSR passes through mostly uninhabited territory no such stopovers are possible, strongly reducing the route’s attractiveness for regular liner service operators.
Bulk dry carriers, such as the iron ore carrier Sanko Odyssey, in contrast, follow less predictable schedules and their routes depend more on changing supply and demand of less time sensitive items. The NSR may also benefit from Russia’s oil and natural gas developments in the Arctic. As the tundra’s permafrost begins to thaw the construction of pipelines and railways will prove ever more challenging and hydrocarbon resources may increasingly be exported via the NSR.
The NSR offers significant distance savings between Europe and Asia, but scheduling uncertainty due to the Arctic environment and the lack of infrastructure in the hinterland, will prevent the route from becoming popular with liner services. For bulk dry carriers and wet carriers, in contrast, the route may increasingly represent an alternative to more traditional shipping routes.
Part 3 on Climate Change and the NSR will be published on Wednesday, September 28th
Sources:
[1] Badari Narayana Srinath, “Arctic Shipping: Commercial Viability of Arctic Sea Routes” (MSc. Dissertation, City University of London, 2010), 24.
[2] United Nations Economic and Social Commission for Asia and the Pacific, Container Trade Growth, http://www.unescap.org/ttdw/publications/tfs_pubs/pub_2398/pub_2398_ch3.pdf
[3] John Vidal, “Modern Cargo Ships Slow to the Speed of the Sailing Clippers.” The Guardian, July 25, 2010, http://www.guardian.co.uk/environment/2010/jul/25/slow-ships-cut-greenhouse-emissions
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