On September 18th, workers at the Port of Qingdao, China, lined up to welcome the Tian Xi, a vessel owned by COSCO arriving from Finland. The vessel got a welcome ceremony because it had arrived in China via a particular route: the Tian Xi had traveled through the Arctic, along the emerging Northern Sea Route.

Is this the future of shipping?

The Route 

The Northern Sea Route (NSR) runs from Murmansk, near Russia’s border with Norway, to the Bering Strait in Alaska. The route is appealing because it offers a significantly shorter path between eager partners, including China and Russia, or Northern Europe to North America: proponents estimate that it could cut voyage times by a third and shipping costs by as much as 40%.

Last year, Maersk, the world’s biggest container shipping group, sent the Venta Maersk to become the first container ship to complete the NSR. The trip successfully demonstrated that the route was 10 days shorter than the southern route that employs the Suez Canal. The route provides the potential to save on time, fuel, wages, Suez Canal fees, and could see a boxship discharged reloaded, and on its way before a southern-routed ship even arrived.

Maersk has continued to insist that this was a one-off trial, and that it does not see NSR as a viable alternative to its usual routes. But this may just be coyness, as signs from every corner seem to indicate an upwell in investment and interest in the potential of a working NSR.

In 2018, the number of vessels crossing waters governed by international polar code was 879, nearly 60% higher than in 2012. This year, COSCO sent nearly double the NSR transit voyages compared to 2018. Among them is the Tian Hui, which will complete a record-breaking three full transits. COSCO has increased its level of engagement with the Arctic route every year since its first voyage in 2013.

Maersk acknowledges it “has experienced a growing demand for transport of goods from the Far East to West Russia, which we are currently exploring the possibility of offering together with Atomflot,” the Russian company that maintains the world’s only fleet of nuclear-powered icebreakers. It would certainly be in Russia’s interest to broaden the appeal of the NSR and diversify the types of cargo that can be carried through.

Experts have estimated that nearly 14% of China’s trade would shift to the NSR if it were made viable. There would be a “huge increase” in bilateral trade between NE Asia and NW Europe, while intra-european trade would stumble.

China, meanwhile, has made investments and diplomatic steps to court the Arctic Council, such as helping to finance the Kouvola-Xi’an train in Finland and investing in Greenland. There are indications that China wants to ensure it has a foothold in the Arctic with an eye for future potential, including tying the Arctic to its Belt and Road initiative. China is by far the largest foreign operator of vessels along Russia’s NSR, and this summer signed an agreement with Novatek to form Maritim Arctic Transportation LLC, which aims to establish a long-term partnership for shipping hydrocarbons.

Who Will the Major Players Be?

First, it’s important to note that this is future talk, and it makes a bet on disastrous levels of climate change.

One forecast by Arctic Institute and Center for Circumpolar Studies suggests that much of the Arctic could be ice-free by as early as 2030. The full potential of the Arctic to become commercially viable is likely at least a decade away. 

So, a consortium comprised of DP World of the UAE, a Russian Direct Investment Fund, Rosatom, and Norilsk Nickel are currently looking into developing a Russian Northern Sea Route. Combining their expertise, they hope to form a strategy for development.

But not everyone is ready to sign on.

Concerns for the Future

Of course, all this involves making business out of– and potentially working– an environmental catastrophe.

Climate advocates say that fragile sea ice and endangered wildlife habitats would be made even more vulnerable in the face of increased shipping traffic. Arctic environmental groups have already requested that COSCO not use high-sulfur fuel on polar trips due to the resulting pollution. At the recent G7 assembly in France, Macron called on carriers to avoid using the NSR. 

Some have pushed back– proponents like Nordic Bulk Carriers argue that shorter travel would reduce CO2 emissions. But there is simply no way to make it safe– if a ship were to run aground, the logistics of a clean up in remote, sub-zero conditions are overwhelming to consider. Ice-breaking oil and gas tankers, which make up just 6% of ships entering Polar Code waters, are responsible for a whopping 33% of their emissions.

CMA CGM, the 4th largest boxship company in the world, has pledged not to traverse Arctic waters.

This all leaves shippers and other actors, including the US, with a choice: to get involved with a possibly crucial emerging route, or to voluntarily step down in order to protect a fragile biome. The route is not ready just yet: but as China, Maersk, and others lay the groundwork, the clock is ticking.

Red Arrow Logistics has the scale and scope to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email me at liz.lasater@redarrowlogistics.com or give us a call 425-747-7914