An Economic Analysis of Container Shipping Through Canadian Northwest Passage

Abstract

Over the last 30 years the extent of sea-ice covering the North Pole has declined between 15∼ 20% on average, and it is expected that by the end of the 21st century, vast areas of the Arctic Ocean will be ice-free during the summer season, thus, increasing the possibility of ship navigation across the Arctic Ocean.In this paper, we have developed a model of shipping for the Northwest Passage (hereinafter NWP) in northern Canada to determine whether ice thinning will make this route more economically viable when compared with the Panama Canal.Among the 7 routes of the NWP, Route 2 and Route 3 offer better navigational conditions than the others. However, Route 3 has a depth limit of only 10m, so here we use Route 2 which is suitable for deep draft navigation to carry on our analysis. Container ships of 4,500∼15,000 TEU under Hub and spoke mode, container shipping between Busan port and New York port is simulated for the Panama Canal and the NWP. This paper considers Canada's sovereignty in matters of navigation over the waters at the Arctic Archipelago, in the form of a toll fee for passage usage. We concluded that the NWP has an advantage over the Panama Canal if it is open for free international passage, regardless of ship size. However, if it is not free, its advantages depend on its toll fee. The lower the toll fee is, the more advantages the NWP will boast.

Arctic shipping: A systematic literature review of comparative studies

“…Five of the studies referring to the NWP did not include any ice breaking fees (Somanathan et al, 2007;2009;Lasserre, 2014;2015;Lu et al, 2014). Five studies referring to the NSR assumed discounted fees which are in accordance with some references from shipping operators: they range from 3 US$/tonne (ballast) to 6.8 US$/tonne (laden) (Raza and Schøyen, 2014), 5 US$/GT (Furuichi and Otsuka, 2014; and 8.2 US$/tonne (Lasserre, 2015).…”

“…In contrast, they were found competitive in most of the studies that applied round or single voyages mainly for bulk or specialised shipping (e.g. Wergeland, 1992, Schøyen andBråthen, 2011;Raza and Schøyen, 2014, Lu et al, 2014, Cariou and Faury, 2015. Finally, the competitiveness of these routes increases for year-round liner shipping operations only in the long-term Tavasszy et al, 2011;Fan et al, 2012;2015).…”

“…Increased crew costs range from 10% (Liu and Kronbak, 2010;Lasserre, 2014; to 28% (Song and Zhang, 2013). Five studies did not include crew costs (Xu et al, 2011;Raza and Schøyen, 2014;Lu et al, 2014;Chang et al, 2015;Pruyn et al, 2016). It is possible that most of these studies assumed that manning costs are same regardless of the route, whilst others considered differences depending on the route but these could not be discerned from their assumptions.…”

“…All these techniques could be employed in order to develop models that test various explanatory variables with respect to the determination of costs, profits and emissions when utilising maritime routes. For instance, Lu et al (2014) use explanatory variables such as freight rates, distance, time, transit fees, fuel consumption and vessel size in order to investigate the cost determinants on both the NSR and the Suez Canal route. Pruyn (2016) uses a sophisticated structural model including macroeconomic data from sixteen countries, vessel sizes, fleet age, freight rates and transport costs to explore the feasibility of the NSR.…”

An Extended Literature Review to Analyses the Economic Impact of Global Warming on Shipping Routes of Developing Countries

“…An increasing body of scientific evidence (Lu et al, 2014;Faury and Cariou, 2016;Yumashev et al, 2017) details the extent of climate change in the Arctic region as per figure 1.Warming caused by climatic factors and by the impact of humans on atmospheric processes from the late 1970s until early2012, has reduced the area covered by permanent ice in the Arctic by almost half (Borgerson, 2008). In Sea Ports, shipping is the main source of emission, representing about 70% of total emission.…”