Arctic shipping still frozen in its tracks even as ice melts

For centuries, a harsh climate and ice-choked seas dashed the dreams of sailors attempting to cross the Canadian Northwest Passage between Asia and Europe. Now, thanks to climate change and reduced ice cover, the trip isn't so daunting. Last weekend, the Crystal Serenity, a luxury cruise ship, carried a record thousand-plus passengers and crew through the passage. Next year, it will do the same.

Does this mean that the age-old vision of a time-saving, money-making Arctic passage for the world's shippers is finally coming true? Don't bet on it. In theory, it's a terrific idea. Travelling from Shanghai to Rotterdam via the Northwest Passage is about 3,540km shorter than going through the Panama Canal. In 2013, the Nordic Orion became the first bulk cargo carrier to traverse the passage. Bound for Finland from Vancouver, it shaved more than 1,600km off a more typical route. Not long after, officials at China's Polar Research Institute predicted that 5 per cent to 15 per cent of China's international trade would use the Northeast Passage, which skirts the Russian Arctic, by 2020.

Yet only 13 ships went through the Northwest Passage in 2015, and 18 through the Northeast Passage. By contrast, 13,874 ships used the Panama Canal and 17,834 went through the Suez. That's because traversing the Arctic still makes very little sense for shipping firms.

The first problem is a familiar one: ice. The Arctic is warming but it remains ice-covered for most of the year. A route that cannot be accessed for months at a time is not attractive to large-scale shippers dependent on timing and reliability. Things don't get much easier in the summer, either: Although the ice is receding, there is considerable variability in where and how it does so, rendering polar passages difficult and dangerous, no matter what the season. Worse, parts of the passage are unusually shallow, and thus can only accommodate lighter cargoes.

Ice and shallow waters are more than just navigation hazards. They are also insurance risks that can take a big bite out of the potential cost savings of an Arctic voyage.

The Crystal Serenity was the first passenger ship of its size to sail the Northwest Passage.
The Crystal Serenity was the first passenger ship of its size to sail the Northwest Passage. PHOTO: AGENCE FRANCE-PRESSE

Perhaps the biggest problem is that the business case for Arctic shipping is weak. Major international shippers create routes with lots of intermediate stops, so a container vessel travelling from Los Angeles to Hong Kong might visit 10 ports along the way, picking up and dropping off cargo throughout Asia. The Arctic does not have the markets and ports needed to sustain this kind of business.

As sea ice recedes further in the years ahead, the Arctic may well become more commercially significant. It contains major oil and mineral deposits and, if extraction started in earnest, Arctic shipping would become an important factor in conveying raw material around the world.

For now, at least, the Northwest Passage remains frozen to everyone but tourists.

BLOOMBERG VIEW

A version of this article appeared in the print edition of The Straits Times on September 12, 2016, with the headline 'Arctic shipping still frozen in its tracks even as ice melts'. Print Edition | Subscribe