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Proposing a common platform of shipping cost analysis of the Northern Sea Route and the Suez Canal Route

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Abstract

Maritime trade between East Asia and Northwest Europe using the Northern Sea Route (NSR) has been recently increasing, because ship operators may take advantage of the shorter sailing distance of NSR whose navigable season has become longer because of retreating Arctic sea ice. As Arctic sea ice continues to retreat because of global warming, the NSR is now approximately 40 per cent shorter than the Suez Canal Route (SCR) for such trade. In 2013, shipping on the NSR marked a record 10 year-high volume of 1.36 million tons with 71 voyages. Accordingly, comparative analyses of estimated shipping cost via the NSR and the alternative conventional routes, especially the SCR, have been carried out. Furthermore, NSR/SCR-combined shipping, that is, when a vessel transits the NSR during the warmer months and the SCR in the colder months, has already been proposed as a realistic scenario for Arctic shipping in the previous studies. Since assumptions used in the cost estimations vary among the studies, as discussed by Lasserre, there remain some difficulties when comparing estimated shipping costs. This study aims at establishing a common platform of a wide range of cost estimation assumptions, through clarifying and analysing the cost components contained in the current literature. In addition, interviews with NSR shipping professionals were conducted concerning the NSR fee on an unofficial basis, since typically such fees are determined based on negotiations between ice breaker escort service provider and shipping company. An empirical analysis revealed that NSR/SCR-combined shipping of container cargo between East Asia and Northwest Europe can be commercially feasible.

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Acknowledgements

This study is largely based on ‘Effects of the Arctic Sea Routes (NSR and NWP) Navigability on Port Industry’ (Project period: 2011–2013), funded by International Association of Ports and Harbors (IAPH). Our special thanks first go to IAPH and all the members of the Port Planning and Development Committee (PPDC) of IAPH. Furthermore, the authors present special thanks to Mr Mitsuhiko Okada, the president of Overseas Coastal Development Institute (OCDI) of Japan for his insight comments.

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Authors and Affiliations

  1. Department of Architecture Building, Graduate School of Management, Kyoto University, Room 205, Yoshida-Honmachi, Sakyo-ku, 606-8501, Kyoto, Japan

    Masahiko Furuichi

  2. North Japan Port Consultants, Ltd. (NJPC), South-2, East-2, 8-1, Chuo-ku, 060-0052, Sapporo, Japan

    Natsuhiko Otsuka

Authors
  1. Masahiko Furuichi
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  2. Natsuhiko Otsuka
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Winner of the Palgrave Macmillan ‘Best Conference Paper’ prize at the 2013 Annual Conference (Marseille-France) of the International Association of Maritime Economists (IAME).

Appendix

Appendix

Table A1

Table A1 Cost component breakdown by ship size
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Furuichi, M., Otsuka, N. Proposing a common platform of shipping cost analysis of the Northern Sea Route and the Suez Canal Route. Marit Econ Logist 17, 9–31 (2015). https://doi.org/10.1057/mel.2014.29

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