MarketLine Blog

Melting ice opens up Arctic shipping route for longer periods

As the melting of ice in the Arctic region intensifies due to increased human activity in the Arctic region, the possibility of using the region for marine transportation purposes also increases. Whereas in the past vessels would have to be escorted by heavy ice breakers, the complete disappearance of or reduction in size of ice has resulted in customized transportation vessels that can also act as moderate ice breakers to emerge. These customized vessels require no escort and have been able to cover vast distances in the Arctic region in record times. The increase in demand for such vessels opens up new sales possibilities for players engaged in the construction of these customized vessels, such as Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries.

The opening up of the Arctic for transportation purposes will especially benefit Russia which is thus far the largest user of maritime transportation in the region, primarily as a means of connecting its port cities spread out over vast distances in Asia and Europe. However, increasingly, many non-Russian players are also entering this route as the travelling duration is decreased significantly for travel between Europe and East Asia, by using the northern Arctic route.

However despite the opening up of new possible routes, uncertainties with regards to ocean currents, future environmental regulation and awareness of indigenous rights and global warming, have all pushed up insurance costs. Many transportation companies that would potentially use this route will hence adopt a wait and see approach in the near future, and if the route remains largely accident free, then the amount of activity in this region as far as marine transportation is concerned will increase significantly.

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