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Climate Change Set to Render Northern Sea Route Commercially Viable

Historically icebound for 10 months of the year, global warming may have inadvertently opened trans-Arctic shipping lane.

Photo: Venta Maersk: Coldly going where no container ship has gone before.
Venta Maersk: Coldly going where no container ship has gone before.
Photo: Venta Maersk: Coldly going where no container ship has gone before.
Venta Maersk: Coldly going where no container ship has gone before.

With a growing number of container ships trialling the Northern Sea Route (NSR) this year, there is ever-increasing expectation that this previously largely inaccessible marine channel may emerge as a serious alternative to the Suez Canal, at present the primary conduit for Asia-Europe freight. It is, however, essential that the NSR is navigable by container ships, as such vessels account for about 98% of all consumer goods shipments across the world.

Of course, the NSR is not some newly discovered route. Although first successfully navigated in 1872, its freezing temperatures – due to the fact it runs wholly along the Russian Arctic coast – saw it deemed as largely impassable, with weather conditions previously putting it off-limits to shipping for 10 months of the year. Now, though, a combination of the increased demand on existing shipping lanes and the far milder weather conditions triggered by global warming have led to the viability of the route being reassessed.

Despite the changes in the local climate and improvements in marine technology, the NSR is still seen as off-limits to the massive Panamax vessels – which can carry up to 20,000 TEUs and make up much of the traffic that passes through the Suez Canal. For one thing, all container craft passing through the NSR need to have the way ahead cleared by an accompanying icebreaker vessel, with such ships not capable of driving through a wide enough route to accommodate the very largest freight-carrying ships. On top of that, the remote location and inhospitable environment make effecting rescues for stricken vessels along the NSR extremely difficult, while any large-scale oil leakages could be potentially environmentally catastrophic in this relatively pristine region.

The challenging nature of the route, however, has not deterred shipping lines from seriously considering its potential. In a pioneering move back in August, the Copenhagen-headquartered Maersk Line despatched one of its ships – the 3,600 TEU Venta Maersk – along the route, making it the first container ship scheduled to pass along the NSR.

On 23 August, the ship set sail from Vladivostok with a cargo of frozen fish destined for Busan, South Korea's largest port. On 28 September, it docked at St Petersburg laden with Korean consumer electronics, after having successfully negotiated the challenges of the NSR. Tellingly, despite being accompanied by an icebreaker, the container vessel never had to call upon its services and passed through the icy waterway entirely unaided.

On the upside, the entire voyage was completed in 10 days less than the typical time taken to reach the same ports via the Suez Canal. On the downside, the increased technical requirements and other related costs meant that the per TEU rate for shipments passing through the NSR is considerably higher than those made via the more traditional route.

While, at present, it may seem there is little likelihood of many scheduled container-ship services adopting the route, the costs and the associated challenges have proven to be no bar to the increasing number of crude oil and LNG tankers that now work the route, largely on account of their more robust construction, wider profit margins and more specific geographic necessity. Indeed, in the first eight months of this year, the volume of such cargo shipped along the route grew by 80% to 10 million tonnes, with crude oil accounting for 45% of the total.

Taking the lead on the tanker front is Saint Petersburg-based SovComFlot, with its fleet having competed more than 100 NSR runs already this year. Back in June, the shipping company announced it had entered into a strategic partnership with Novatek, one of Russia's largest independent gas producers, which will see SovComFlot charged with transporting LNG from a number of drilling sites around the Arctic region, including Sabatta, a gas-field that lies almost exactly at the mid-point of the NSR.

Overall, Russia sees the greater exploitation of the NSR as something of a priority, especially as it has been designated as one of the key development pillars of the Far Eastern Federal District. It is also seen as a catalyst for boosting trade between Europe and the Asia-Pacific region. Indeed, with climate change expected to have continuing impact along the NSR route as a whole, it is anticipated that, ultimately, the route will remain sufficiently free of ice all year round for regular commercial shipping services to be scheduled in.

With both SovComFlot and Maersk having led the way to a certain degree, it is now expected that the Shanghai-headquartered COSCO shipping group will step up its own services along the NSR, a move that has been directly mandated by China's central government in line with its growing interests in the Arctic region. In order to facilitate the inevitable rise in traffic this will trigger, it is now seen as essential to develop the existing seaports along the Eastern Siberian coastline.

Given the mutual interests involved, such developments are likely to herald a major new phase of Sino-Russian co-operation. Indeed, a number of commentators have been quick to point out that such joint initiatives would tie in neatly with both the aims of China's Belt and Road Initiative and the domestic priorities laid down by the Russian Federal Government.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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