2019 June 7
The head of Russian shipping giant Sovcomflot expects sailings along the country’s Siberian coast to become routine as the ice melts and operators look to save time and fuel for Europe-bound cargo.
“The Northern Sea Route shipments are growing by geometrical progression,” Chief Executive Sergey Frank said in an interview at the Nor-Shipping conference in Oslo. “It’s a question of time before all kinds of ships routinely cross it.”
Arctic routes are drawing greater attention as the global climate warms and polar ice recedes, potentially opening new paths between Asia and Europe. The mostly frozen NSR seaway is considered a likely commercial lane because it already is used in warmer seasons to move part of Russia’s extensive energy exports.
The NSR runs close to the Arctic Circle from the Russian Far East to the Baltic Sea and is typically open from July to November.
Russia is promoting the lane as the shortest distance to ship containers from Asia to Europe, and a possible rival for routes that now take ships through the Suez Canal.
Cargo volumes along the route grew substantially last year as tankers with ice-breaking capability and liquefied natural gas carriers began to move through the region to Western markets.
Sovcomflot tankers crossed the NSR more than 100 times last year, handling crude exports from Gazprom ’s Novy Port oil facility in northern Russia. Crude tankers account for about 45% of ship traffic on the NSR.
Other sailings originated at Russia’s massive Yamal LNG project, with ice-class, purpose-built tankers moving natural gas from the Port of Sabetta to Europe.
“The driver for transportation economy is basically distance, and the NSR cuts sailing time by around 20% compared to the route across the Suez,” Mr. Frank said.
The NSR has no transshipment ports and the giant boxships that go through the Suez Canal are too big for its shallow waters, but Mr. Frank said he expects growing numbers of smaller container ships to use the route in coming years.
“Trade is growing and there is space for everybody. If the cargo originates in the south part of China, it will go through the Suez. If it originates in Northern China, the NSR will be seriously considered,” he said. “Cargo will always find the fastest way to move.”
Denmark’s A.P. Moller-Maersk A/S, the world’s largest container ship operator, sent a small container vessel across the NSR last summer from Vladivostok to St. Petersburg. The Venta Maersk saved more than 10 days of sailing time compared with travel via the Suez.
Maersk said the goal was to collect data and that it doesn’t see the path “as an alternative to our usual routes.”
China’s state-owned Cosco Shipping Holdings Co. has sent more than a dozen general cargo vessels across the NSR.
“There is more infrastructure being built across the route and modern icebreakers are being added. It will not happen tomorrow, but everyone is looking at the NSR,” Mr. Frank said.
State-owned Sovcomflot is one of the world’s biggest tanker and natural gas carriers, with a combined fleet of 146 vessels.
The company has been planning for years an initial public offering on a Western exchange, but Moscow hasn’t given the green light. Mr. Frank said plans to list in New York or London have been dropped and when the time comes, it will list in Moscow.
“We are 100% ready for an IPO, but shipping is currently not on investors’ radar,” he said. “We are waiting for better market conditions.”