The Potential of the Northern Sea Route for a Regular Cargo Service

(By Bruce Buchan ; INSROP Working Paper No. 15 – 1995, III.07.2)

Each commodity traded by sea between Europe and the Far East has its own transport requirements. Some of these requirements stem from the physical characteristics of the goods, others from the terms of their sale. Various types of commercial shipping arrangements have been developed to accomodate the requirements of the different goods. The distinctive features of the Northern Sea Route mean that some of the more commonly known types of commercial shipping would be unsuitable for the NSR. If a regular cargo service were to use the NSR, that service would have to be based on cargoes which are compatible with the severe weather and ice conditions and relatively short operating season.

Commercial shipping has two extremes. At one extreme are those ships which adhere to strict, predictable schedules, at the other those which operate as 'tramps'. A tramp ship has no fixed itinerary, being chartered for the most attractive cargo convenient to its previous port of discharge. In between these two extremes are cargo service specializing in certain types of cargo or particular geographical areas, often both. These unscheduled specialized services normally transport semi-finished goods using tramp ships chartered from the ships' owners; the cargoes are suitable for the NSR.

To test the viability of the Northern Sea Route for cargo services between Europe and the Far East, this analysis started with a study of the actual cargoes offered on the London shipping marked to determine which were suitable as a basis for service. Once this was established,detailed costings for loading, carrying and discharging these cargoes were obtained from the companies involved in these operations. This information was used to calculate the financial results were these cargoes to be carried on existing ships via the Northern Sea Route, using the real freight rate levels for voyages via the Suez Canal.

These calculations indicate that during the part of the year the the NSR is open to navigation the financial result for the vessels currently operating on the NSR is at least comparable to what the ships could earn on the carter market for worldwide voyages. These existing ships are smaller than those operation via Suez and so unable to take advantage of the economies of scale inherent in larger vessels; this seems to bode well for the NSR if larger vessels capable of transiting the Route are built. The conclusion is that, carrying the right types of cargo, there is potential for a Europe/Far East service via the Northern Sea Route.

Bruce Buchan, 1995, The Potential of the Northern Sea Route for a Regular Cargo Service, INSROP.©