Wednesday

4th May 2016

Focus

Arctic shipping routes unlikely to be 'Suez of the north'

  • The North Sea route has become freer of ice, but the navigation season is still just two-four months (Photo: Gus MacLeod)

Late last year a cargo ship made maritime history. It became the first foreign bulk carrier to make a commercial trip across Russian Arctic waters.

Carrying over 40,000 tonnes of iron ore, the MV Nordic Barents left Kirkenes port in Norway on 4 September.

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It sailed the North Sea route, a path that runs eastwards from northern Europe, along Russia's north coast and through the Bering Strait. Some three weeks later, it docked in Xingang, northern China.

"The whole trip went very well. There were no big delays and it was a lot cheaper. Just compared to going via the Cape of Good Hope, the savings for fuel alone was around $550,000," said Christian Bonfils, CEO of Nordic Bulk Carriers, operator of the ship.

The Russians have been using Arctic waters all year round for decades. Retreating sea ice due to global warming in recent years has seen foreign shipping companies start to look northwards for the possibility of commercial shipping routes. But until recently the area has been closed to foreign ships wanting to get to hungry Asian markets.

Instead companies use the Suez Canal - a trip which, counted from Norway, is almost twice as long.

Last year Tschudi Shipping, which owns a mine in Kirkenes, approached the Russians about the possibility of using the North Sea route to get to China, the mine's biggest customer.

"We got a very clear message from the Russians. It was: 'We want to compete with Suez'," said CEO Felix Tschudi. The Norwegian company hooked up with Nordic Bulk Carriers, who had the right type of ice ship, to make the trip.

Until then uncertainty about how much the Russians would charge for the mandatory use of their ice-breakers meant the trip was not economically viable.

"The rate we paid last year [$210,000] for ice-breaker services was very comparable with the Suez Canal," said Bonfils.

Getting Russian natural resources out

So what prompted the Russian thaw? According to Professor Lawson Brigham, an expert on Arctic policy at the University of Alaska Fairbanks, it comes down to Russia wanting to exploit natural resources in the area.

"The bottom line is that Russia's GNP is tied to Arctic natural resources development.

The real driver is building up a transport system to move the cargoes of natural resources to global markets and one of the big global markets sitting there is China," he said.

The region has a wealth of natural resources including nickel, iron ore, phosphate, copper and cobalt. There are huge reserves of gas in the Shtokman gas field, while a 2008 report by the US Geological Survey suggested oil in the Arctic circle could amount to 13 percent of the world's undiscovered supply.

Tschudi and Bonfils have an additional, more prosaic explanation. The obligation to use Russian ice-breakers is a money spinner.

"If they can employ their icebreakers in the summer season, then it's good business for them," said Bonfils.

Problems

Several more such trans-arctic trips are planned this year. According to Tschudi the North Sea route "will be important for those who are shipping from fairly high north."

"It will be quite important for mines in the Kola Peninsula [in north west Russia], mines in Finland. You can also save by shipping from Rotterdam."

But for all the buzz it has been creating - shipping companies are also thrilled at the prospect of pirate-free waters – caveats abound.

Good trade depends on predictability

Global warming has meant the North Sea route has become freer of ice. But this is the case only for about four months a year at most, sometimes only two. An impact study on Arctic marine shipping by the Arctic Council notes that the navigation season for the North Sea route is expected to be 90-100 days only by 2080.

"Despite all of the change, the Arctic Ocean is ice-covered for most of the year." said Brigham, adding: "The global maritime industry works on just-in-time cargoes and the regular nature of marine traffic."

"There is a little bit of a misperception that this is a new global regime with new global shipping lanes that will replace Panama and Suez [canals]."

In addition, businesses need to feel less that they are subject to Russia's whim when it comes to tariffs. "We need predictability [on prices] in order to plan," said Tschudi.

There are a host of other problems too. There is little infrastructure in Arctic territory. If a ship gets into trouble, help is far away. There are also no clear rules on standards for ships sailing in the area.

The waters are not as well chartered as elsewhere. More oceangraphic and meterological data is needed as well as information on icebergs. At the political level, there is a dispute over the waters. Russia considers the Northern Sea route as national territory, so it makes the rules. The US disagrees.

Environment

And then there is the environmental impact of increased shipping. More traffic means there is a greater risk of oil spill. The ships will introduce alien species through their hull water and are likely to interrupt the migratory patterns of marine mammals.

Carbon emissions could accelerate ice melting even further, and this in a region where the average temperature has risen almost twice as fast as the rest of the world's.

Other ship emissions , such as SOx and NOx, may also have unforeseen consequences on the Arctic environment.

Norwegian explorer Borge Ousland says it is vital not to forget that changes in the Polar regions could have global effects.

"It is easy to look at the Polar regions as an isolated area but any change in temperature has an effect on the rest of the world," he said recently.

"I am very worried about what I have seen in the last 20 years. When I went up to the North Pole for the first time in 1990, the ice was three to four metres thick. In 2007 we measured the ice for the Norwegian Polar Institute and the coverage of ice was now 1.7 metres thick."

EU recovery to slow this year

On just 1.8 percent growth, the commission's forecast is less optimistic than before because of an instable global economy and lack of results of EU reforms.

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