The Northern Sea Route (NSR) continues to ratchet up milestones, with a Chinese multipurpose vessel carrying containers transiting the route and highlighting the potential of the passageway to cater for box shipments from Asia-Europe. The NSR's development continues, but BMI warns a number of barriers must still be removed for Russia's plans for the route to be realised.
The COSCO multipurpose vessel, the Yong Sheng has transited the NSR and has completed its journey from the port of Dalian in China, pulling into Europe's largest container port, Rotterdam. The 19,000 tonne vessel is now unloading its cargo of containers, steel and heavy equipment.
The ship's voyage through the NSR is an important development for the NSR for three reasons. The first and second reasons are: the direction of the ship; and its cargo. To date, the major milestones of the NSR's development have seen commodities shipped from Europe to Asia. The Yong Sheng transport of containers also highlights the NSR's potential to play a role in the global box trade.
The Asia-Europe container route is one of the major global box routes. The route traditionally transits through the Suez Canal, but the NSR option offers speed, with Yong Sheng taking 35 days to reach Rotterdam from Dalian, compared to the Suez Canal route, which takes 48 days.
The NSR also bypasses volatile Egypt and the pirate-infested Gulf of Aden. This threat was highlighted during Yong Sheng's passage through the NSR, with one of the vessel's sister ships, the COSCO Asia, targeted by a rocket-propelled grenade as it went through the Canal.
The final and major development for NSR by the transit of Yong Sheng is the increasing interest from China in the route. Yong Sheng is operated by China's largest shipping firm COSCO and has been highlighted by the company's chairman, Ma Zehua, who has stated that the NSR offers 'clients more convenience and choice, while allowing us to save time, lower costs and reduce emissions'.
The backing of China for the development of the NSR is further highlighted by the country's expansion of its icebreaking fleet. In September 2012, Xuelong (Snow Dragon) became China's first vessel to cross the Arctic Ocean, sailing along the NSR into the Barents Sea.
China's increased interest in ice class vessels will aid in the development of the NSR, as currently there are just five icebreakers available to accompany ships transiting the NSR. An increase in available ice breakers is required, as without them the volume of shipping traffic through the NSR will not be possible.
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BMI believes that the use of the NSR will continue to develop and that the volumes of shipments through it will increase. However, we highlight the continued drawbacks.
The route is only open for the summer months and although the transit time available is increasing, with the 2013 navigational season opening two weeks prior to that of 2012, the most bullish view held, that of Sovkomflot's Director General Sergei Frank, is that the NSR will in the future be open for six months.
BMI also highlights the lack of facilities along the route, although Russia is seeking to address this issue, with rescue stations being developed, which will be vital in this treacherous ice-filled stretch of water.
Finally there is Russia's exposure to the NSR. It is Russia that is driving the development of the use of the NSR and is investing heavily in the project. The country has the most to benefit and is already stamping its ownership on the NSR. In February 2013 Russia set up a state agency to govern the Arctic Asia-Europe sea route. The agency will set tariffs and regulations.
Russia's control of the NSR was displayed in August 2013 when Russia banned a Greenpeace icebreaker from entering the route. Russia's control over this developing trade route is leading to some worries in the shipping community with the Financial Times quoting one Norwegian shipping executive stating 'one thing that makes me nervous is that this route is in Russia's hands... if they suddenly want to triple rates or impose this condition or that condition they can.'
As noted, the development of the NSR will be steady but slow. In terms of how Russia can benefit, the country could potentially benefit from tariffs and the increase in ship volumes on the route, which are likely to lead to a greater focus on Russia's northern port range. BMI highlights the port of Murmansk as best placed to benefit. The port already plays host to commodity vessels embarking on the NSR to Asia and should the container trade develop from Asia we would expect it to also play a role. In 2010 the port of Murmansk's potential box role was first put forward.