Arctic Shipping Route: Foreign Interest Rising
Interest in the Northern Sea Route (NSR, via the Arctic Circle) is intensifying, with a Norwegian-flagged bulk carrier due to become the second non-Russian-flagged vessel to pass through the shipping lane. The potential of the route continues to pique interest as the ice recedes, and Russia is keen to develop it into a trade route by upgrading its merchant fleet to include vessels capable of transiting the NSR unaccompanied and by upgrading its ports along the route.
The Nordic Barents, an ice-class bulk carrier, is due to sail from the Norwegian port of Kirkenes in early September and travel via Arctic and Russian waters to China. The ship is due to deliver 41,000 tonnes of iron ore to China, just one of the cargos that could potentially benefit from the shorter route that the NSR offers from Europe to high-demand raw-materials markets in Asia.
Shipments of oil and gas are the other commodities that my colleagues at BMI’s Freight Transportation Team believe could benefit from the passage. The first shipment of gas condensate via the NSR set sail in August 2010 on a Sovkomflot vessel, the Baltica, and docked in the Chinese port of Ningbo on September 6. Sovkomflot is already planning its next voyage for 2011, when it plans to send an ice-class Suezmax tanker through the NSR.
Northern Sea Route
Cost Savings The Main Attraction
Growing interest in the NSR as a potential trade route stems from the projected cost savings that can be made by choosing the NSR over the Suez Canal. By using the NSR, the Baltica is reducing its normal shipping journey of about 20,400km via Suez to just 12,500km. This reduction in transit time potentially offers cost savings in terms of fuel and the length of time for which a vessel needs to be chartered. A company shipping via the NSR would also save by not paying the Suez Canal transit fee. Additionally, using the route would avoid the threat of piracy, which is an ongoing issue in the Gulf of Aden.
But are shipping companies prepared to swap the risk of piracy for icebergs? BMI also notes that although transit times are indeed reduced by using the NSR, the cost saving may not be as great as first imagined, because vessels travelling via the route have to factor in the extra cost of being accompanied by icebreakers.
Despite these drawbacks, I see potential for the NSR to develop its role in the global shipping sector. Although it will not usurp the Suez Canal, due to the fact that the NSR is currently only open for a couple of months a year, if ice continues to recede then the route could potentially stay open for longer, which will heighten its appeal. As mentioned, the Nordic Barents is set to become the third non-Russian-flagged vessel to pass through the NSR, and the German shipping company Beluga sent two vessels via the route in 2009. This highlights that the route has attracted the attention of international companies.
Russia, however, will remain the main proponent of shipping via the NSR and is developing its merchant fleet by building a new generation of Arctic supertankers that will be able to navigate the Northeast Passage independently. Russia has also pledged to develop its ports along the route to enable ships damaged by ice to be repaired.
BMI believes that as the NSR develops, the port that will reap the biggest rewards will be Murmansk. The port is currently renowned as a coal export facility, but plans are in the pipeline for the development of an oil terminal there.