With the impact of climate change on Arctic sea ice, several comments have been published to the effect that diminishing sea ice would quickly translate into the development of massive transit routes across the Northwest Passage (NWP) and the Northern Sea Route (NSR). In the literature, if the hype about the advent of the new cold war for the Arctic, its resources and its future seaways is receding, papers are still published that depict the Arctic as “the World’s Last Treasure”, the object of a “race” for the control of natural resources and strategic shipping lanes. It appeared the control of these would-be strategic Arctic routes was about to trigger tensions if not conflicts in the region.
Twenty years later, Arctic shipping did indeed expand significantly, but the actual picture is significantly different from what analysts projected. Destinational traffic appears to be the driver of Arctic shipping expansion, while transit traffic remains marginal. What are the main features of Arctic shipping? Results show contrasting evolutions along the NSR and the NWP.
A definite increase in Arctic shipping
Traffic has experienced a significant growth in the Arctic, and along the Northwest Passage. In the Arctic as a whole, the number of single vessels entering the area increased by 25% between 2013 and 2019.
Figures below indicate that vessel movements are definitely increasing substantially in the Arctic. From 2009 to 2019, traffic was multiplied by 1.92 in the Canadian Arctic, and by 1.58 between 2016 and 2019 in waters of the Northern Sea Route (The Northern Sea Route comprises Russian Arctic waters between the Kara Gate and the Bering Strait. Thus, traffic in the Barents Sea is not included in NSR figures, nor traffic in Russia’s Arctic Pacific waters).
Table 1. Vessel movements in the Canadian Arctic, number of voyages, Nordreg zone.
Source: figures compiled by the author from data submitted by Nordreg, Iqaluit
Table 2. Vessel movements in NSR waters, number of voyages
Source: adapted from CHNL
Within the general and substantial increase in vessel traffic in these three areas, contrasting trends can be observed from these figures. The year 2020 was particular because of the impacts of the pandemic, that either affected mining or triggered a ban on cruise shipping in Canada, for instance.
In the Canadian Arctic, growth in traffic was mainly driven by fishing vessels (+106.2 percent between 2009 and 2019) and cargo ships (+122 percent), of which dry bulk experienced the fastest expansion (+288.9 percent), driven by mining activities, and general cargo (+156.5 percent), driven by community supply.
Bulk traffic has benefited from the exploitation of Arctic and subarctic mines, such as Voisey’s Bay (Labrador), Raglan (Quebec), and Mary River (Baffin Island, Nunavut). This expanding traffic has largely compensated dwindling traffic to and from Churchill since the port closed down in 2016 before reopening in 2019 (only 4 voyages of grain-carrying bulk vessels in 2019 and 3 in 2020). For instance, Baffinland Iron Mines shipped 920,000 tons of ore from its mine in Mary River through its port of Milne Inlet in the first year of activity in 2015, then 4.1 million tons in 2017 and 5.1 million tons in 2018. The company intends to eventually reach an annual volume of 12 million tons. Other active gold mines north of Rankin Inlet also generate traffic related to the logistics of mining operations. In the Canadian Archipelago, Fednav operates strong ice-classed vessels capable of navigating in winter, servicing the two Deception Bay mines in northern Quebec. The company may develop a business model in partnership with mining companies for year-round shipping to Deception Bay and Milne Inlet (operational) as well as Steensby Inlet (projected). The logistics of mining activities are dominant in terms of tonnage in the Canadian Arctic: the capacity of bulk carriers servicing mines (in cumulated vessel dwt), at 6.1 Mt, accounted for 77.3% of the tonnage capacity of traffic in the Canadian Arctic in 2020.
In Russia, tanker traffic increased 67.5 percent between 2016 and 2019. LNG tanker went from nil to 507 voyages, and icebreaker voyages increased 238 percent. Tanker traffic experienced a sustained growth with the oil and gas developments in the Barents Sea (Prirazlomoye and Varandey oil terminals) (Agarcov et al 2020) and on the Yamal peninsula and Ob Bay, with Sabetta and Novy Port main terminals and the impending opening up of Arctic LNG 2 terminal (Staalesen, 2018; Katysheva, 2020). With the programmed opening of coal and lead and zinc mines, and more ore shipments from the port of Murmansk, bulk traffic should experience a fast growth in the Russian Arctic as well.
It is apparent that the main driver for the expansion of shipping in the three areas is natural resources exploitation, including mining, oil and gas, and fishing. However, contrary to popular belief and widespread expectations, transit traffic remains very limited along Arctic passages in Canada and Russia.
Transit traffic remains weak
Despite the ongoing melting of sea ice, transit traffic remains rather limited along the Northwest Passage and the Northern Sea Route, here again with differentiated pictures.
Table 3. Transit traffic along the Northwest Passage, 2006-2020
Source: figures compiled by the author from data submitted by Nordreg, Iqaluit
Table 4. Transit traffic along the NSR, 2006-2020
Source: CHNL data, compiled and adapted by author
In both cases, there is a definite trend towards an expansion but with differentiated histories and composition. Transit numbers across the Northwest Passage were higher at the beginning of the period, experienced growth until 2012, witnessed a moderate decline, expanded again until 2017, then collapsed in 2018, only to recover in 2019. Transit in the NWP is largely composed of pleasure boats as opposed to between zero and two commercial vessels. This may be about to change: 3 transits were performed by cargo vessels in 2019 and 5 in 2020. Vessels from the Dutch shipping company Royal Wagenborg accounted for 2 of the transits in 2019 and all 5 in 2020. The company openly advertises the voyages, hinting it may attempt to develop this market in the future.
Figures show that both in terms of voyages and tonnage, transit represents a very small share of total traffic along the NSR, despite the recent increase in tonnage since 2018 as transit tonnage increased to 1.2 Mt in 2020. In transit traffic along the NSR, cargo vessels are more diversified than in the NWP; between 2010 and 2014, tankers dominated transits, then general cargo vessels since 2015. Bulkers were a significant share of vessels in 2012, 2013 and again in 2020. As far as tonnage is concerned, bulkers represented the largest component of transit in 2020 with 1.004 Mt or iron ore from Murmansk (78,4%) are are largely responsible for the fast expansion of transit that year, whereas in 2019, crude oil represented 43.3% of transiting cargo and iron ore 21.5%. It is noteworthy to underline, by the way, that these shipments of iron ore from Murmansk represent transit from an Arctic port and thus can be considered as Arctic destinational traffic, a methodological point evoked above.
Transit traffic along the NSR was initially very modest, then expanded up to a high of 71 voyages in 2012, then collapsed to 18 in 2014 to recovery gradually to 37 in 2019 and 64 in 2020. It may be that the increase is an ongoing process from now on, but that does not hide the fact that transit traffic remains modest especially when compared to destinational traffic along the NSR, and when compared to transit traffic along major straits or canals like Malacca, Suez or Panama. This transit level is clearly out of step with media forecasts announcing the advent of heavy traffic along Arctic routes. This is due to several factors:
- The decline in oil and fuel prices, which makes the search for possible reductions in transit costs less attractive for shipping companies.
- The continuing global decline in both bulk and container freight rates, which discourages shipping companies facing overcapacity from investing in new ice-bound vessels.
- A confusing tariff schedule for the services of the Northern Sea Route, sometimes considered opaque by maritime carriers.
- The ongoing perception by the industry that transit shipping is risky and poorly profitable.
The composition of this traffic also differs by region. Commercial cargo ships represent the largest share of transit traffic along the NSR, whereas transit along the NWP is largely composed of pleasure boats, with commercial vessels comprising between zero and two units (except for five in 2019). Among the elements that explain this very weak interest for transit traffic along the NWP, let us mention a higher ice concentration in summer, the absence of promotion of the NWP as opposed to a very proactive stance in Russia, and a higher level of equipment and infrastructure along the NSR, including ports that can harbor ships in cause of damage. Icebreaker support also varies greatly, with Canada having only nine Arctic-capable icebreakers as opposed to Russia’s five nuclear and 37 diesel icebreakers.
This comparison between total and transit traffic underlines the fact that destinational traffic (ships going to the Arctic, stopping there to perform an economic task and then sailing back) remains the driving force in Arctic shipping. This destinational traffic is fueled by the servicing of local communities, the exploration for natural resources and their exploitation, including mining, oil and gas, and fishing. Natural resources extraction is by far the strongest driver in Arctic shipping. While some discoveries are rather promising, in Alaska, in Canada or in Russia, the large-scale development and operation of these projects remains uncertain, despite Russia’s willingness to push for the rapid expansion of extraction. First, because operating costs are high, but also because the industry remains very sensitive to world prices. The high volatility that has marked this year, between pandemic and price war has therefore had a definite impact on current projects, and it remains to be seen what the impact will be in the long term.
In the context of climate change, Arctic shipping is developing, and it is mainly fueled by destinational shipping. Because of its sensitivity to just-in-time in the context of Arctic shipping where uncertainty is bound to remain the norm for years to come, transit traffic remains insignificant in the Northwest Passage and weak in the Northern Sea Route, all the more so as a large share of the official traffic figure reflects in fact Arctic destinational voyages to and from Murmansk, increasingly a major Arctic hub. This destinational traffic stems from community resupply, and natural resources extraction, mining in Canada and oil & gas in Russia, although mining is set to experience a significant development in Siberia in the next few years. Arctic shipping is thus vital for communities in Canada, Greenland and Siberia, while an economic leverage for the development of natural resources extraction (mining, oil & gas, fishing) in the frame of a growing economic integration of these Arctic spaces in the global economy. Container shipping for the foreseeable future remains marginal, but the possible development of Arctic hubs coupled with dedicated Arctic shuttle lines could enable the emergence of an alternate business model that could facilitate its expansion.