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  • Sep 20, 2014
  • Updated: 4:16pm
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Arctic route has little allure for shipping industry

Global warming has opened northern seaway, but few cargo ships have made the journey

PUBLISHED : Wednesday, 16 October, 2013, 12:00am
UPDATED : Wednesday, 16 October, 2013, 3:05am

The new shipping route opened up through the Arctic by climate change will not be crowded any time soon.

Cargoes of coal, diesel and gas have made the trip but high insurance costs, slow going and strict environmental rules mean there will not be a rush to follow them.

Looser ice means icebergs. One vessel has already been holed, and large icebreakers, not always on hand, are a must.

"Significant safety and navigational concerns remain an obstacle to commercial shipping in the northern sea route, despite recent media reports of 'successful' transits," said Richard Hurley, a senior analyst at shipping intelligence publisher IHS Maritime.

The key obstacle here will remain the insurance, as it’s still simply too risky
MICHAEL FRODL, CONSULTANT

"AIS [ship] tracking of vessels in the area shows all vessels are subject to deviation from direct routes as a result of ice, and many areas still cannot be navigated safely without the presence of large icebreakers able to provide assistance, such as a lead-through to clearer waters."

Last month, a ship carrying coal from Canada passed through the Northwest Passage to deliver a cargo to Finland, in a trip its operators said would save US$80,000 worth of fuel and cut shipping time by a week.

The world's top oil trader Vitol brought tankers in October with Asian diesel to Europe via the Arctic route over Russia, potentially saving hundreds of thousands of dollars in costs.

The fast-growing liquefied-natural-gas market, in which Arctic players like Russia and Norway play a big role, has also seen maiden Arctic voyages.

Hurley said the passage of the Yong Sheng cargo vessel in August from China to Europe via the Arctic route was only possible with the aid of the world's largest nuclear-powered icebreaker, 50 Let Pobedy, to get it through the Lapatev Sea. Only four large icebreakers were available at any one time to cover the whole northern sea route.

A small Russian oil tanker was holed in the Kara Sea, also off Russia, last month.

"Even though damage was minimal and did not cause a pollution incident, the holing revealed the fragility of emergency help," Hurley said. "Taken together, all the inherent dangers and concerns over potential Arctic pollution count heavily against time and cost savings alone when assessing the commercial viability of the seaway."

The market is also still nascent for insurers.

"The key obstacle here will remain the insurance, as it's still simply too risky a proposition for standard commercial insurers," said Michael Frodl of US-based consultancy C-Level Maritime Risks, who advises insurers. "The ships aren't ready, the support facilities and port infrastructure are not yet in place, and the risks haven't been figured out enough to price insurance correctly."

Others say the commercial potential is unlikely to be viable for container ships, which transport consumer goods, partly as trade flows develop beyond China in coming decades towards other regions including Africa and South America.

"The further away global trade moves from a totally China-centric export pattern, the more a short 'polar' route loses its appeal," said Jan Tiedemann, shipping analyst with consultancy Alphaliner.

"The Southern route - even if longer - will always have the advantage of serving numerous markets at the same time."

According to French ship-classification society Bureau Veritas, there were 40 Arctic-route trading voyages last year for all vessel classes including oil tankers, with around one million tonnes of cargo moved. That compared with 700 million tonnes transported through the Suez Canal.

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