Above the 66th parallel North, Arctic sea ice is receding at an unprecedented rate, thus creating new navigable sea lanes and business opportunities. However, the economic potential appeal of the High North is far from being a risk-free endeavour.
Over the past few decades, Arctic sea ice has been steadily declining. Climate change is increasing temperatures around the globe, but not all regions are affected equally. Since the 1950s, global temperatures have risen by an average 1º C, against 2º C in the Arctic. The consequences in such a fragile ecosystem are felt immediately. In April of this year, Arctic sea ice extended to 14 million km2 , which is almost 1 million km2 below the average registered during the three last decades. Not only is the extent of the ice sheet declining, but the ice itself is also getting significantly thinner. A recent study shows that that since 1975, ice thickness is down by 65%, meaning that multi-year ice is becoming rarer and that 1-2 year-old ice is becoming more common.
While the recession of the Arctic sea ice is causing evermore alarm amongst environmental groups and scientists, shipping companies see in it a potential lucrative bonanza. Today, about 90% of world trade is carried out by the shipping industry. With an increasing world population and the emergence of new economies (especially in Asia), sea trade is set to develop even further in the future. Currently, the main maritime shipping routes are all located below the Arctic circle: the Panama Canal, the Strait of Hormuz and the Strait of Malacca are the busiest choke points. But the shipping industry is now eyeing the North-West Passage (NWP) off the coast of Canada, and the Northern Sea Route (NSR) along Russia’s coastline, for potential alternatives as sea ice melts.
Why would shipping companies choose to go North? The Arctic is home to sea lanes that would allow a shorter transit time between the world’s biggest economic hubs: North America, the EU and Asia. In 2013, a cargo transporting coal named the “Nordic Orion” traveled from Vancouver, Canada to Finland using the NWP. The NWP is 1000 nautic miles shorter than the usual route (which runs through the Panama Canal), and allowed the company to save $80,000 worth of fuel. For the shipping industry, the Arctic has numerous advantages. The NSR being the shortest connection between Europe and Asia, companies will be able cut costs both in fuel and manpower. Given that is it unlikely that Somali pirates, who have been impeding shipments over the past decade, would go North to hijack merchant ships, the cost of insurance could also go down. Finally, avoiding routes such as the Suez and Panama Canals would mean avoiding taxes put in place by governments operating the passages.
Despite the advantages listed above, Arctic shipping remains a risky business even today. The NWP and NSR are not navigable year-round, but only in the summer months, when the ice extent is at its lowest. Even then, random drifting ice floes still pose a threat to ships. But the bigger issue is the high level of unpredictability of the weather, which renders business activities hard to conduct. If during a trip the ice condition changes unexpectedly (thus causing a transport delay), perishable goods face a greater risk of spoilage. Also, especially in the case of Canada and the US, more icebreakers are required to keep sea routes safe and operational. Currently, the lack of adequate infrastructure required to provide ships with search and rescue capabilities and to respond to oil spills in a timely manner can make Arctic shipping a perilous endeavor.
Arctic maritime shipping offers significant advantages over the traditional sea lanes, but according to some estimates, it might take another decade or so before the NWP and the NSR witness a dramatic increase in traffic. However, if we are to see a resurgence in piracy and if the ice extent continues shrinking at a faster rate, Arctic shipping might become a reality much sooner than previously expected. In the meantime, the International Maritime Organization has already added new safety and environmental measures to the Polar Code.