Image: Annie Spratt via Unsplash
International supply chains were thrown into disarray when the 400-metre-long container ship Ever Given got stuck in Egypt’s Suez Canal, taking rescue teams almost a week to free it.
To avoid future debacles, the canal could move to upgrade its technical infrastructure. In addition, Cairo could expand a second channel south of the one that Egypt opened in 2015, which would allow traffic to continue flowing even if a ship were stuck or grounded.
But as the global appetite for trade grows, so does demand for minimizing risks of disruption and exploring alternative ways of delivery.
The canal carries more than 10 percent of global trade, including 7 percent of global oil and roughly 8 percent of liquefied natural gas.
Approximately $9.6 billion in goods pass through the Suez Canal each day, according to Lloyd’s list. That means a blockage could cost global trade $6-10 billion a week.
Moreover, the industry has long struggled to keep up with the increasing size of commercial vessels even before the recent blockage. The average length of most vessels has increased exponentially over the last 10-15 years.
The Northern Sea Route could emerge as a convenient alternative to the Suez Canal and contribute to global supply chain demand.
The Northern Sea Route (NSR) is a shipping route that runs along the northern shore of Russia and is the the primary sea communication in the Russian Arctic. It connects the European and Far Eastern ports of Russia with a length of 5,600 km from the Kara Gates Strait to Provideniya Bay.
The NSR has several comparative advantages, including a geography that makes shipments faster.
The Suez Canal is currently an essential link for Russian oil to Asia. The NSR allows cargoes to cut the journey time to Asian ports by 15 days compared to the Suez Canal, which is why Russia has invested heavily to develop the Route.
Russia plans to use the NSR to export oil and gas to overseas markets while companies, including the country’s biggest LNG producer Novatek, already navigate the Route.
After the recent blockage, Russia’s energy ministry said the stranded container ship highlighted the Northern Sea Route’s safety and sustainability.
Global climate change could further boost the NSR’s competitiveness.
As the country in the world with the most extensive fleet of icebreakers, Russia can try to capitalize on global climate change that has caused Arctic ices to melt.
Transit of the eastern Arctic usually ends in November. Still, the Kremlin hopes that climate change and icebergs’ melting mean that the Route’s commercial benefit will increase.
In August 2017, the first vessel travelled along the Northern Sea Route without ice breakers. Three years later, shipment volumes reached almost 33 million tonnes, and the energy ministry expects to hit 80 million per year by 2024.
However, the most serious question lies in the realm of infrastructure in the Russian High North, which is not ready to meet such ambitious plans as challenging the Suez Canal.
Thus, while the Northern Sea Route is a vital transportation artery, it is mainly essential to Russia as a means to develop its Arctic region.