Thursday, September 13, 2018

Shipping: Egypt (Suez Canal) Is A Bit Nervous About Russia's Northern Sea Route

Following on this morning's post, "Shipping: Venta Maersk Successfully Transits Russia's Northern Sea Route Becoming The First Container Ship To Do So", here's a story we've been waiting to link, from Egypt Today:
CAIRO – 29 August 2018: Although Maersk will be sending its Venta Maersk vessel to collect data from the Arctic sea route in the next few days, research has shown that the Suez Canal Route is more cost effective and will remain unaffected.

Maersk has explained in a press release that this is a one-off trial to collect data and try the path in real life. The company has explained that it will continue to sail through the Suez Canal route.

In the next few days Danish Maersk will be sending its Venta Maersk vessel loaded with Fish from Russia and electronic products from South Korea; the Venta Maersk, which will be the first container ship to go through the Arctic sea route, will collect scientific data. “Other types of vessels have already used it, including Maersk’s Chinese rival COSCO, according to the Arctic Institute,” explains Reuters’ Stine Jacobsen. The vessel will go from South Korea to St. Petersburg.

“The Northern Sea Route runs from Murmansk near Russia’s border with Norway to the Bering Strait near Alaska. Ships sailing it require a permit from Russian authorities,” according to Jacobsen.

Russia aims for this path to become the new Suez Canal.

Despite Maersk pointing out that the Arctic route has many challenges, some have excitedly and, to an extent, prematurely started to argue that the days for the Suez Canal are over, explaining that the other route will take less time, meaning more commodities can be sent. Although the time factor may be on the side of the Arctic route and the fact that climate change has played in favour of said route by melting sea ice and enabling ships to pass more easily, full-rounded research suggests that the Suez Canal will continue to be the best route to take and will remain a favourite.

The Venta Maersk, one of the most advanced and largest (3,600 20-foot container capacity) ice-class vessels, making a trip like this is seen as one of the expansion steps that Russia aims to do in the Northern Sea. “A well-respected company like Maersk sending a container ship through the Arctic, definitely signals there’s something there,” explains Malte Humpert, a senior fellow at U.S.-based think-tank Arctic Institute.

An evaluation

The Northern Sea route has one clear advantage over the Suez Canal route: Time. However, time is not the sole factor that shipping companies look at when they are choosing their route.

There are actually three ways to calculate this, according to researcher Tor Wergeland, who concludes that the Suez Canal is a better route: “Calculating the total transportation costs for using each route to obtain a $/ton cost estimate for each route;
calculating the total cost of setting up a regular service based on an assumed yearly quantity to be shipped; focusing on cost differences among the route alternatives.”

According to his research, “The first approach focuses on cost savings for the end user of transport. The second approach takes into consideration that saving time makes it possible to service a given amount of cargo with fewer vessels (trips) and is thus taking into consideration the capital costs of investing in vessels. The third approach is more used in a first commercial feasibility study, i.e. one explores the order of magnitude of cost savings to get a feeling for cost differences and to be able to do simple sensitivity tests.”...MUCH MORE