Transpolar shipping- The “Future” Arctic Shipping route?

You’re reading this article on an electronic device. This device contains thousands of components which are assembled at a final assembly stage. These individual components are manufactured in different parts of the world and the final component- i.e. your device, is assembled in some other part of the world.

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These finished components are then shipped from all corners of the world to the ‘Final’ factory for the Final Assembly, Testing and Packaging (FATP). An article by The New York Times beautifully sums up this complex process, in the case of an iPhone. 

Handling almost 90% of the global freight traffic, the shipping industry is hence the backbone of the manufacturing industry. And the shipping industry operates on its feet, round the clock to deliver the freight on time at the designated destinations. 

The recent ‘clogging’ of a freighter in one of the busiest global shipping routes suddenly shed light on the vital aspects of maintaining the supply chains with the aid of effective and efficient shipping. 

And that’s when the Arctic Shipping Route comes into picture. 

Global Warming is, quite literally- a burning issue. But, it is predicted that this issue could actually simplify the shipping between North America and East Asia. And while we all are busy trying to control our emissions, some have already anticipated the degradation of the Arctic ice cap and are working towards promoting effective shipping through the Arctic Shipping Route!

Just like the Transpolar flights revolutionized the aviation industry, the Transpolar shipping also looks pretty promising. 

Here’s how it’s proposed to work out-

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It’s pretty obvious from this image that the trade between East Asia and North America will be blessed by the Arctic Shipping routes! 

The main beneficiaries of this route will be- you guessed it- the manufacturing giants located in East Asia. 

Given the export-driven economy of many East Asian countries and the giant importers in North America, this route will prove to be of huge strategic significance in global trade. Russia and Canada have the longest coastlines in this region and the USA has, perhaps, the most developed freight institutions located conveniently in Alaska

This route will not just reduce the time required and distance covered to ship goods between these two continents, it will also significantly reduce the shipping costs involved. Also, The Arctic Shipping Route is an entire route in itself- it does not involve the frills which have to be carried out in case of  a canal-driven shipping route. And this ultimately prevents the ‘clogging’ that we just spoke about in the beginning!

As a consequence of this new shipping route, the canal traffic will be eased to a great extent. The Panama canal will perhaps be the most ‘eased-out’ canal after this route becomes operational. 

But, this route comes with a set of significant opportunity costs (and hopefully not sunk costs!) Since this route does not involve any canals (or restrained waterways), the shipping companies have an endless opportunity to increase the size of their ships. Currently,  the largest ship (OOCL Hong Kong) has the capacity of 21,413 TEUs but the Economies of Scale in TEUs are expected to diminish as they approach 20,000 TEUs. This happens due to the fact that it is possible to build larger ships in a short period of time but it’s not feasible to expand the ports at the same rate. For example, the Data shows (ref. graph below) that most of the major ports in the USA are not yet equipped to handle such exponentially increasing capacities. Furthermore, the supply chains don’t end after the components are unloaded at the port- the land supply chain follows next. And the land supply chain has to also cope up with this sudden inflow of freight.

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Given the geography of the Arctic region, shipping via this route requires several ‘add-ons’ like ice breaking apparatus on the ships or individual ice breaking boats (which escort the larger ships). And in case of emergencies, the freight has to be unloaded on these ice breakers. The difficulty in this case becomes obvious after you compare the sizes of large freighters with the ice breakers!

And most importantly, we have to consider the Arctic Ecosystem. This region is governed by the laws formed by the United Nations Convention on the Law of the Sea (UNCLOS) and the UNCLOS dictates the Right to fish on the high seas (Article 116) and the Marine mammals (Article 120).  However, regular freighting activity does pose a significant amount of risk to the local ecosystem and the implementation of these laws is a different topic altogether! But in spite of these issues, it goes without saying that Transpolar shipping is showing all the signs of being the next big thing- and with the increased awareness of sustainable shipping practices, we can surely be optimistic about all the future shipping routes on this planet!

Madhura Joshi

FY BSc Div-2

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