What route for Arctic shipping?


An important part of the narrative surrounding the Arctic involves the expected increase in shipping as polar ice melts and recedes.  The possibilities have gotten the shipping industry’s attention, as well as sparked concerns about foreign use of the Northwest Passage, spurred development of a Polar Code to regulate international shipping, and piqued Chinese interest.  Amidst all of the speculation, what can we realistically expect to happen with Arctic shipping in the next 10-15 years?  The short answer is that Arctic shipping activity will increase, but only certain kinds, and only at certain times of the year. 

First, we should be clear about what types of shipping are most likely to take place.  Destinational shipping, where ships travel to locations within the Arctic, is expected to increase.  This category involves either shipping out resources extracted in the Arctic or shipping in goods to the many Arctic communities that depend on such deliveries for their supply of goods and fuel.

Cruise tourism is an increasingly popular activity in the Arctic; for example, Microsoft co-founder Paul Allen sailed through the Northwest Passage last summer, docking at Pond Inlet on the way.  This type of shipping has been rising but is still quite small – about 20-30 commercial voyages, and an unknown number of private voyages, a year.  A lack of onshore tourism services and activities, and the continued navigation difficulties, will likely keep the number manageable.

The transportation of Arctic oil and LNG to southern markets is an area likely to grow in the coming years, especially if natural gas prices rebound.  If drilling increases, offshore rigs will require significant supply and support, necessitating a concomitant increase in destinational shipping.  

Trans-national container shipping involves shipping very large container loads across the Arctic to markets in North America, Europe and Asia.  The idea is that the distance to ship from Asia to Europe or North America through the Arctic can be much shorter, by thousands of miles, than going through the Panama Canal or past Cape Horn. However an Arctic route poses many challenges that make large scale container shipping unlikely. 

Container shipping occurs on a just-in-time-schedule in order to reduce costs associated with warehousing and storage.  The unpredictable ice conditions in the Arctic mean that arrival times cannot be guaranteed.  Similarly, Arctic passages are currently navigable for only about 6-12 weeks a year.  (Even in the worst case global warming scenarios, the Arctic will be covered in ice during the cold, dark winter months for the duration of this century.)  Ships wishing to go through the Arctic, even if only in the summer, will be required to have an expensive double hull and other safety requirements through the Polar Code. The cost savings elicited from the shorter distance are not expected to justify the added construction costs of making container ships ice-capable.  High insurance premiums and icebreaker assistance needs make transnational shipping even more cost-prohibitive. 

Although in pure economic terms Arctic container shipping seems unlikely, Asia still seems interested. With an estimated half of Chinese GDP dependent on shipping, China is eager to diversify its supply and trade routes, particularly by reducing its reliance on shipping through the Straits of Malacca and the Lombok Strait.  An Arctic route would have the additional advantage of contributing to the development of China’s north-east region.  There have been reports that China has been working to develop navigation charts for parts of the Arctic, and that (very preliminary) discussions have occurred to establish a transshipment hub in Iceland.   

South Korea, by contrast, is interested in the economic benefit of Arctic shipping, as it hosts the largest ship building yards in the world.  Samsung Heavy Industries have developed a double-acting vessel that has the same open sea characteristics as other ships in its class combined with the breaking capacity of an icebreaker, cutting through up to 1.5 metres of ice. While the bow is shaped for regular sailing, the stern is designed for ice- breaking with the ship turned around when there is heavy ice and the stern used as the bow.  South Korean industry (and, incidentally, its subsidiaries in Finland) thus has a vested economic interest in the development of a trans-Arctic shipping route and industry.

One should also distinguish between different possible routes in the Arctic.  The route that runs through the Canadian Arctic Archipelago – the Northwest Passage – will be especially unpredictable.  Some areas will be relatively open during the summer months; others may actually be more difficult to navigate, as ice from other areas floats into them and blocks passage.  A far more attractive avenue for transnational container shipping would be through the Northern Sea Route, which runs along northern Russia.  This route is already well developed from exporting oil and gas.  However there can be strategic concerns when dealing with Russia, and they sometimes charge exorbitant prices (reportedly in the hundreds of thousands of dollars) for icebreaker assistance.   It may be possible in the next fifty years for an open sea to develop in the Arctic Ocean, and for ships to subsequently travel straight across the Pole. This would be faster and cheaper, but it would still only be possible in the summer months.

One thing is for sure: the ice is melting, and fast.  This is going to allow for an increase in shipping one way or another.  However conditions are going to remain unpredictable for the short and medium term.  (And as John Meynard Keynes famously stated, in the long term we’re all dead.)  The technology currently exists to build ships that can go through any thickness of ice and at any time of year.  But ships that can do that are expensive to build and expensive to operate.  As usual, then, we can expect any increase in Arctic shipping to reflect the price of commodities such as oil, gas, and minerals.  As the world’s appetite for resources grows, and as conventional sources dry up or get dug up, it will become profitable to extract Arctic resources. With the dearth of transportation infrastructure in large swathes of the Arctic, those resources will end up being shipped out.  A lot of questions remain unanswered.  But the time for Arctic shipping has come.   

Heather Exner-Pirot

Heather Exner-Pirot is the Managing Editor of the Arctic Yearbook, a Fellow at the Macdonald Laurier Institute, and a Global Fellow at the Woodrow Wilson International Center for Scholars.

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