{"id":22576,"date":"2017-11-14T17:25:10","date_gmt":"2017-11-14T22:25:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/northern-sea-lanes-melting-arctic-ice-creates-supply-chain-opportunity\/"},"modified":"2017-11-14T17:25:10","modified_gmt":"2017-11-14T22:25:10","slug":"northern-sea-lanes-melting-arctic-ice-creates-supply-chain-opportunity","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/northern-sea-lanes-melting-arctic-ice-creates-supply-chain-opportunity\/","title":{"rendered":"Northern Sea Lanes: Melting Arctic Ice Creates Supply Chain Opportunity"},"content":{"rendered":"

Climate change has traditionally been viewed through the lens of economic threat, but significant opportunities also exist.\u00a0 Steady reduction in polar ice due to increased temperatures has introduced drastically shorter shipping routes between Asia, Europe, and North America.\u00a0 As more shipping companies take advantage of these routes to shorten their supply chains, demand for polar infrastructure are increasing.\u00a0 Atomflot, a subsidiary company of Russia\u2019s state-operated nuclear conglomerate Rusatom, operates nuclear powered icebreakers in these waters[1]<\/a>.\u00a0 As traffic increases, Rusatom needs to expand their investment in new equipment to take full advantage of this positive aspect of global warming.<\/p>\n

Figure 1: Arctic Shipping Routes[2]<\/strong><\/a><\/p>\n

\"\"<\/a><\/p>\n

Two of the primary shipping routes between Asia, Europe, and North American ports are the Suez Canal Route (SCR) and Panama Canal Route (PCR). \u00a0The Northern Sea Route (NSR) is not a single route but a combination of passageways connecting Europe and Asia.\u00a0 The Northwest Passage (NWP) is a similar collection of routes in the Arctic waters north of Canada, shortening the trip for North American bound Asian and European ships[3]<\/a>. \u00a0Figure 1 depicts the northern sea routes, and Table 1 compares distances between major ports utilizing various sea routes.<\/p>\n\n\n\n\n\n\n\n\n\n
Departure Port<\/td>\nDestination Port<\/td>\nTraditional Dist (nm)<\/td>\nNorthern Dist (nm)<\/td>\nPercent Shorter<\/td>\n<\/tr>\n
Northwest Europe<\/td>\nBusan<\/td>\nSuez Canal: 10,827<\/td>\nNSR: 7,248<\/td>\n33%<\/td>\n<\/tr>\n
<\/td>\nHong Kong<\/td>\nSuez Canal: 9,753<\/td>\nNSR: 8,399<\/td>\n14%<\/td>\n<\/tr>\n
<\/td>\nShanghai<\/td>\nSuez Canal: 10,532<\/td>\nNSR: 7,688<\/td>\n27%<\/td>\n<\/tr>\n
New York<\/td>\nBusan<\/td>\nPanama Canal: 10,056<\/td>\nNWP: 8,107<\/td>\n19%<\/td>\n<\/tr>\n
<\/td>\nHong Kong<\/td>\nPanama Canal: 11,148<\/td>\nNWP: 9,258<\/td>\n17%<\/td>\n<\/tr>\n
<\/td>\nShanghai<\/td>\nPanama Canal: 10,577<\/td>\nNWP: 8,547<\/td>\n19%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Table 1: Traditional and Northern Sea Route Distances Compared[4]<\/strong><\/a><\/p>\n

While shorter distances clearly show the benefit of northern routes, significant sea ice has traditionally prevented use.\u00a0 This is gradually changing.\u00a0 The Intergovernmental Panel on Climate Change (IPCC) has shown that sea ice coverage in polar regions has decreased at an average rate of 3.8% per decade since monitoring began in the mid-twentieth century.\u00a0 This reduction has been irregular in space and time, with 49% reductions in September compared to less than 2% reductions in March.\u00a0 As the rate that ice retreats in summer months and expands in<\/p>\n

winter months changes, thickness of the ice is also affected.\u00a0 Average polar ice thickness has decreased by 1.8m in the same period as the 3.8% coverage decrease[5]<\/a>. \u00a0Experts mostly agree that polar ice will not fully disappear in this century, but the steady decrease in coverage and thickness allows for ice-breaker assisted transit.\u00a0 Demand for icebreakers is also assured by NSR regulation \u2013 Russia operates the Northern Sea Route Administration (NSRA), which forecasts ice coverage and mandates icebreaker escort for most vessels[6]<\/a>. \u00a0With their unique capabilities, Atomflot is poised to capture significant value from environmental and regulatory conditions.\u00a0 Demand for icebreakers already results in hour or day long waits to transit the NSR, which will continue to increase if demand for more icebreakers is not filled by Atomflot[7]<\/a>.<\/p>\n

Figure 2: Sea Ice Coverage Change, September 1987-2012[8]<\/strong><\/a><\/p>\n

\"\"<\/a><\/p>\n

Atomflot currently operates four nuclear powered icebreakers, and in response to demand has ordered an additional three, all contracted to be operational by 2020[9]<\/a>. \u00a0Atomflot faces several other decisions and opportunities.\u00a0 The first relates to service life extension of existing icebreakers.\u00a0 The ships were designed for 100,000 hours of active icebreaking over 26 years, putting two of the existing ships up for retirement within a year of 2020\u2019s new ships.\u00a0 Maintenance upgrades exist that have already extended one vessel\u2019s life to 171,000 hours, with the possibility of 225,000 hours[10]<\/a>. \u00a0The significant investment of new ships will add no permanent capacity to the fleet without these upgrades, so Atomflot should extend the life of all existing ships to the greatest extent possible. Atomflot and the Russian government should also consider extending their market into the Northwest Passage, where ice is a greater threat to shipping than on the Northern Sea Route.\u00a0 By increasing capacity and expanding markets, Atomflot will create a mutually beneficial situation for themselves as well as shipping companies taking advantage of the shorter routes.<\/p>\n

Completely reliable climate change predictions would make the number of new ships to build a straightforward analysis.\u00a0 Much subjectivity remains, forcing the question of what assumptions should Atomflot and similar companies make about the next hundred years?\u00a0 The opportunity window for profitable icebreaking operations exists between the present day and whenever rising temperatures result in permanent open waterways over the poles.\u00a0 Some experts put that as soon as 2060, at which point large capital investments in icebreakers would be useless[11]<\/a>. \u00a0Regardless of the specifics, trends in climate change show that anyone involved in international shipping will see significant impact to their supply chains in coming years.<\/p>\n

Word Count: 792<\/p>\n

[1]<\/a> Rosatom Group, \u201cThe Nuclear Icebreaker Fleet,\u201d http:\/\/www.rosatom.ru\/en\/rosatom-group\/the-nuclear-icebreaker-fleet\/, accessed November 2017.<\/p>\n

[2]<\/a> M. Humpert and A. Raspotnik, \u201cThe Future of Arctic Shipping,\u201d October 11, 2012, Port Technology International, <\/em>https:\/\/www.thearcticinstitute.org\/future-arctic-shipping\/,accessed November 2017.<\/p>\n

[3]<\/a> Orts Hansen et all, \u201cArctic Shipping \u2013 Commercial Opportunities and Challenges,\u201d CBS Maritime, Copenhagen Business School, ISBN 978-87-93262-03-4, (January 2016), p.10.<\/p>\n

[4]<\/a> Ibid, p. 27-28<\/p>\n

[5]<\/a> Ibid, p.22.<\/p>\n

[6]<\/a> Ibid, p.12.<\/p>\n

[7]<\/a> Ibid, p.28.<\/p>\n

[8]<\/a> Ibid, p.23.<\/p>\n

[9]<\/a> Rosatom Group, \u201cThe Nuclear Icebreaker Fleet,\u201d http:\/\/www.rosatom.ru\/en\/rosatom-group\/the-nuclear-icebreaker-fleet\/, accessed November 2017.<\/p>\n

[10]<\/a> \u201cAtomflot: Russia needs to build more icebreakers due to increased Arctic shipping,\u201d February 16, 2017, The Arctic with Support of the Russia Geographical Society, http:\/\/arctic.ru\/infrastructure\/20170216\/553706.html, accessed November 2017.<\/p>\n

[11]<\/a> Jugal Patel and Henry Fountain, \u201cAs Arctic Ice Vanishes, New Shipping Routes Open,\u201d The New York Times<\/em>, May 3, 2017, https:\/\/www.nytimes.com\/interactive\/2017\/05\/03\/science\/earth\/ arctic-shipping.html, accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

Builders and operators of icebreakers stand to gain as international shipping firms increasingly utilize Arctic shipping routes in the face of global warming. <\/p>\n","protected":false},"author":9731,"featured_media":22577,"comment_status":"open","ping_status":"closed","template":"","categories":[1398,1505,1218,1817],"class_list":["post-22576","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-arctic","category-cargo-shipping","category-climate-change","category-russia","hck-taxonomy-organization-atomflot","hck-taxonomy-industry-shipping","hck-taxonomy-country-russian-federation"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nNorthern Sea Lanes: Melting Arctic Ice Creates Supply Chain Opportunity - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/northern-sea-lanes-melting-arctic-ice-creates-supply-chain-opportunity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Northern Sea Lanes: Melting Arctic Ice Creates Supply Chain Opportunity - 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