Future Prospects of Arctic Shipping Depend on Regulation and Economics

The ambition to develop an Arctic ‘silk route’ to connect European or North American ports with Asia is by no means a novelty. Changing climate conditions have reduced the number of months in a year during which the Arctic is covered by stable ice and have thus revived the centuries-old dream of the Dutch and English East India Companies. But economic, technological, infrastructural and regulatory obstacles remain as challenging as ever.

The immediate future of Arctic shipping lies in its attractiveness as a destination rather than a transit sea area, with activities such as extracting natural resources, offshore shipping as well as cruise tourism. European shipping companies are developing an increasing interest in these markets, which need an adequate regulatory framework to flourish in a sustainable manner.

This was echoed in the main message ECSA Secretary General Patrick Verhoeven conveyed this afternoon during his presentation at the Ice Day Conference, which is being held today and tomorrow in Levi, in Finnish Lapland.

“The growth of Arctic shipping is in destinational traffic and that is where we see a clear interest for European shipping companies“, added Patrick Verhoeven, “To ensure a sustainable development of these markets, we need to have a proper regulatory framework in place. In that respect, we join our colleagues of the International Chamber of Shipping (ICS) in welcoming recent progress made with the IMO Polar Code. Although several challenges still exist, we note there is a clear willingness to complete a meaningful instrument soon, possibly by the end of this year. We also count on the EU to promote international cooperation and freedom of navigation as well as to abolish of restrictive practices.”

“The economics of sailing through the Northern Sea Route or the Northwest Passage will prevent a major boom from materializing in the near future”, added Patrick Verhoeven, “Distances are shorter, but navigational speed is slower and timetables are unreliable due to nautical conditions and lack of appropriate safety infrastructure. The seasonal nature of Arctic navigation and the fact that there are no intermediate markets along the Arctic routes are serious deterrents for container traffic. Add to that limited economies of scale as well as high costs of icebreaking, pilotage and insurance and you will understand that we are still a long way from having a viable alternative to the Suez or Panama routes. A lot will also depend on the future trade policy of China and the strategy of the Russian Federation.”

The Ice Day Conference is an initiative of the Centre for Maritime Studies of the University of Turku. The international conference provides a platform for professionals to discuss the particular demands of shipping in Arctic conditions. It is held for the sixth time, north of the Polar Circle.

[mappress]

ECSA, February 7, 2014