Thursday, 28 June 2012

'Northern Sea Route' transits set to soar

$ 650,000 savings in fuel costs alone

The 75 600 dwt bulk carrier "MV Sanko Odyssey" became the largest ever bulk carrier to sail the Northern Sea Route in 2011. (Pic courtesy Barents Observer)

Despite protests from environmentalists that see commercial shipping's use of the Northern Sea Route as a grave threat to the fragile Arctic ecosystem, a record number of ships are slated to transit the area this year, collectively saving millions of dollars in fuel costs alone. The route has become easier since 2007 as retreating ice- caused by global warming- has meant near halving of the East-West transit times compared with transits that involve passing through the Suez Canal.

Starting next month, just one company- Nordic Bulk Carriers A/S- will ship up to 560,000 tonnes of iron ore in six to eight shipments from Murmansk in Russia to China, Nordic's Director Christian Bonfils confirmed to Bloomberg last week. The reason? A saving of 1,000 tons of fuel- roughly $650,000- per transit. The Danish company will become "the biggest user of the (Northern Sea) route in terms of volumes transported by year-end", he stated.

Even though the number of ships sailing through the Northern Sea Route is small so far- just 34 vessels used the passage from Europe to Asia in 2011- numbers and cargo quantities are increasing rapidly. Cargo volumes were about 820,000 tonnes last year and just 111,000 tonnes in 2010; this year, they may well touch a record 1.5 million tons.

Russia is providing icebreaker escorts and otherwise actively promoting the use of the Northern Sea Route, especially for any cargoes that are destined for Asia and loaded north of Rotterdam. This includes oil, natural gas and bulk cargoes. The voyage allows vessels to follow the islands of Novaya Zemlya to the Bering Strait. The Murmansk-to-China journey takes just 23 days or so; using the Suez would take 43.

One issue is the availability of ships sufficiently strengthened to pass through the ice; this may be partly because the Northern Sea Route is open for just four months or so of summer each year, after which these ships no longer command a premium in the market. As things stand, 1A-class vessels are the only ones permitted by Russia’s government to use the Arctic route. Fifty-five Panamaxes out of the global fleet of 2,005 have reinforced hulls, according to Nick Brown of the Lloyd’s Register; only three have the top classification of 1A Finnish Swedish Class.

Nordic Bulk Carriers made the first commercial Arctic voyage in 2010. The following year, the company sailed the largest ice class vessel afloat- the “Sanko Odyssey”- from Murmansk to China. President of DryShips Inc. George Economou says that ship owners can charge a daily rate for suitable vessels that is up to four times higher than they do for the Suez route, because of the huge savings in time and fuel involved. His company has four ice class Panamax vessels on order, at a cost of $34 million each.


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