Analysis | The decline in energy prices has cooled interest in Arctic shipping, but for China it is full-speed ahead
The first half of 2016 has seen temperature and minimum sea ice records in the Arctic shattered, and as a result the discussion about sea routes in the region, while muted because of the fall in energy and commodity prices and global economic uncertainties, has not gone away.
One example of this trend has been China’s increased maritime activity on the Northern Sea Route (NSR) this summer. After completing two successful transits of the NSR in 2013 and 2015, the modified Chinese cargo vessel MV Yongsheng, operated by Cosco, commenced a third run through the seaway in late July. This time, the ship was to deliver freight, including wind-power equipment, to the United Kingdom.
The voyage comes after Cosco announced last year that it wishes to gradually but steadily expand the number of NSR transits to improve cross-continental trade between China and major European economies.
The current journey of the Yongsheng is not the end of the story, however, as Cosco also announced that at least two other cargo ships were preparing to also travel the NSR before the end of the summer. This week, the recently constructed cargo vessel Tianxi is operating near the Vil’kitskogo Strait, north of Siberia.
A heavy lift vessel, the Xiazhiyuan 6, is currently underway from Tianjin, and is expected to reach the northern Russian port of Sabetta before the end of August. Its role is to deliver supplies to the Yamal liquefied natural gas (LNG) project in the area.
Another heavy lift vessel, the Xiangyunkou, based in Guangzhou, was also reportedly on track to make use of the route in the near future. These ships were expected to make one-way trips through the NSR for their maiden runs through the Arctic, taking advantage of the favourable ice conditions so far this summer. These voyages have formed the cornerstone of what Cosco spokespeople have referred to as a developing ‘Yongsheng-plus’ business model.
Cosco’s Arctic shipping plans suggest an optimistic approach to the potential expansion of NSR shipping in the coming years, despite a falloff in the number of ships using the route since a record was set in 2013. That year, 71 ships took the NSR, but by 2014 the number had dropped to 31. By 2015, that figure had dropped to 18.
These erratic numbers underscore the still-unpredictable nature of the NSR in terms of climate conditions, cost calculations and overall demand. Exactly when the NSR will be open for more regular shipping and for exactly how long each year is anyone’s guess. Nonetheless, the potential savings in fuel and time the route offers (under optimal conditions, transit durations using the NSR take about two-thirds of the time required to use the traditional routes through the Indian Ocean/Malacca-Suez), continue to influence China’s interest in the Arctic as an emerging trade route.
This year, Cosco expressed the intention to “normalise” cargo shipments via the NSR, with the firm betting that the passage will continue to grow in importance as conditions permit. These developments will also factor into growing co-operation initiatives in the Arctic between China and Russia, especially in light of recent announcements of new regional energy, transportation and exploration partnerships.
As Beijing’s overall Arctic policies continue to expand, it is looking clearer that shipping will form a major part of these initiatives.
The author is a senior research fellow at the Norwegian Institute of International Affairs (NUPI) in Oslo.
Originally published by The Arctic Journal. Re-published here with the permission of the author.
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