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The Arctic container route works; the backhaul does not yet exist

By Toni Tan · · 10 min read

Two state-backed attempts to move containers across the top of Russia closed within days of each other this month, and both ended the same way: cargo out, empties home. The Northern Sea Route has now been demonstrated twice in one season by two governments. What has not been demonstrated is a paying return leg, and without one the Arctic is an outbound premium lane rather than a release of capacity on the trades that set carrier economics.

What happened

South Korea completed its first container round trip to Europe via the Arctic on 11 October, when the PanStar Acro docked in Busan 50 days after sailing on 22 August. The ship entered Arctic waters on 31 August, reached Felixstowe on 12 September, called Rotterdam the following day and departed Gdansk on 18 September, arriving home five days behind the planned 45 day schedule, The Maritime Executive reports. It was the country’s third voyage on the Northern Sea Route.

The vessel is a 2,758 TEU, 45,500 dwt ship built in 2011, acquired from HMM at the beginning of August and ice-strengthened for the trip, with a crew given Arctic training. President Lee Jae-myung said the one-way transit was about 10 days faster than the Suez Canal routing, with officials targeting regular service by 2030, and the Minister of Oceans and Fisheries described the accumulated navigation data as groundwork for commercialisation.

China’s experiment ran longer. Sea Legend Shipping launched a China to Europe Arctic Express in August with up to seven ships of low or moderate ice class and eight weekly westbound voyages from Ningbo-Zhoushan and other Chinese ports. Final departures were pulled forward from early October after forecasts pointed to expanding sea ice, and vessel tracking sites recorded delays of four to nine days on some sailings, gCaptain reports. Chinese transport authorities put the transit at 18 to 20 days to Northern Europe, roughly half the Suez time, and identify the normal navigation window as roughly July through October.

The data

Cargo is where the two trials converge. PanStar marketed the voyage in Korea and Japan seeking about 1,300 TEU and left with 737 TEU of laden cargo, chemicals, used vehicles and auto parts from six Korean shippers. It came home with no import cargo and 1,743 empty containers, Aju Press reported via The Maritime Executive. Korean officials blamed a marketing campaign that started too late.

Sea Legend’s season was a genuine export programme. Zhejiang authorities put cargo across the eight voyages at more than 14,000 TEU, about 59% of it Zhejiang origin, and Ningbo Customs recorded 7,761 TEU worth 5.33bn yuan (about US$750m), dominated by energy storage equipment, power batteries and new energy vehicles. The published schedule called for about 15,700 TEU of vessel capacity, with Istanbul Bridge the largest ship at 4,890 TEU.

For scale, Container Trades Statistics put global liftings at a record 17.46m TEU in August alone, up 3.7% year on year. A full Chinese Arctic season is therefore about 0.08% of one month of global throughput, and what a TEU is is the unit the whole market is reported in.

The market the Arctic would have to compete with is not standing still. Drewry’s World Container Index stood at US$4,351 per 40ft container on 8 October, down 2% week on week, with Shanghai to Rotterdam at US$3,337 and Shanghai to Genoa unchanged at US$3,696, as Container News reports. Drewry’s cancellation tracker counts 34 blank sailings across the main east-west trades from week 42 to week 46, out of 713 planned sailings, a 5% cancellation rate, with the return of services via Suez adding effective capacity on Asia to North Europe and the Mediterranean.

Two things set the floor under Arctic operations. The IMO’s Polar Code is mandatory under SOLAS and MARPOL, has been in force since 1 January 2017, and requires a Polar Ship Certificate classifying a vessel as Category A, B or C, along with mandatory training for officers in charge of a navigational watch. Reuters reports that experts tie the route’s value to reliable schedules, the cost of slowing to avoid ice, special insurance premiums and extra fuel use, and that Seoul consulted Moscow about the transit, including whether the ship would need help if it became stuck.

What the evidence suggests

The interpretation here is that the binding constraint is the return leg, not the ice.

Both trials were built around export cargo leaving Asia, and the only public information on what came back is that PanStar returned empty. An outbound-only lane earns on one leg and costs on the other, so the voyage has to be recovered in the westbound rate premium, and the costs Reuters identifies, slowing for ice, insurance, extra fuel and schedule padding, land on that same leg. Ice strengthening also reduces what a given hull can lift, the window is two to four months a year, and how container ships are sized explains why ice-capable tonnage is small ships rather than the vessels the main lanes deploy.

That is also why the Arctic cannot be read as an input to the current rate discussion. Capacity is returning to Asia to North Europe through Suez, blank sailings are running at 5% of planned sailings and the composite index is falling. A service of a few thousand TEU over four months does not move those numbers, which is the same conclusion the 8 October market update reaches from the other direction.

What the data cannot separate is whether the cargo was absent or merely unsold. Officials attribute PanStar’s shortfall to a late marketing start, which is execution rather than a limit of the route, and neither operator has published a westbound cargo book. The reporting on container counts is not settled either: agencies agree on 737 laden containers outbound, while empties are reported at about 200 by some, up to 1,300 container moves in total by others, and 1,743 on the return by Aju Press.

The counter-case

The strongest honest objection is that the east-west mainline is the wrong benchmark. On this reading the Arctic is a seasonal premium lane for cargo where a shorter transit has real value, energy storage equipment, batteries and new energy vehicles among it, and the fact that 14,000 TEU is 0.08% of global liftings says nothing about whether those boxes paid for the voyage. The empty return, on this view, is what a new lane looks like in its first season, the fixable part is cargo mix and marketing, and state backing in Korea and China does not have to clear a spot-rate hurdle in year one, least of all against a Suez routing whose advantage is measured in tens of dollars per slot before war-risk premiums are counted.

What would resolve the disagreement is a published westbound load factor, a second season on similar tonnage, and evidence that shippers pay an Arctic premium over the all-in Suez cost. Until one of those appears, both readings fit the data.

Where the official positions stand

South Korea’s is the most explicit. The president has called for regular Arctic service by 2030, and the ministry will examine sailing distance, transit time, operating costs and fuel consumption from the voyage, with officials targeting economic viability by 2035. Chinese transport authorities frame the route as a roughly half speed alternative with a July to October window, and Sea Legend says it intends to resume next summer.

On the Russian side, the EU adopted a sanctions package on 12 October that added 826 companies and 743 executives, including yards involved in icebreaker and offshore vessel construction such as Vyborg Shipyard, and the regulation entered into force the day it was published, gCaptain reports. The designations freeze assets and bar EU persons and companies from funding those entities, but they do not by themselves prohibit Russian-built commercial vessels. The route runs along Russia’s Arctic coast under Russian administration, and Reuters reports that Seoul consulted Moscow on the transit and that the project risks friction with Western allies.

What to watch

  • The Korean ministry’s review of transit time, operating cost and fuel burn from the voyage, and the shape of the 2027 trial plan.
  • Whether Sea Legend resumes next summer, with how many ships and what ice class. A second season on similar tonnage is the cleanest test of the late-marketing explanation.
  • The 2027 navigation window. A close earlier than the July to October norm compresses an already short season.
  • Any published westbound or Europe to Asia cargo book from either operator. This is the test the route has not yet passed.
  • The Drewry Asia to North Europe print, US$3,337 per 40ft on 8 October, against the Suez all-in cost. The Arctic case is a spread question, and war-risk premiums and canal discounts keep moving the spread.
  • Enforcement of the 12 October EU designations on yards involved in icebreaker construction, and whether escort capacity is affected in any measurable way.

Sources

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