arctic transits – opportunity or challenge? the northern shipping route and the northwest passage...
TRANSCRIPT
ARCTIC TRANSITS – OPPORTUNITY OR CHALLENGE?THE NORTHERN SHIPPING ROUTEAND THE NORTHWEST PASSAGE
Presented by
Marcus Baker
Global Chairman,
Marine Practice
Written by
Stephen J HarrisSenior Vice PresidentMarine Practice
MARSH
Rotterdam
Shanghai
Singapore
Suez Canal Route
19,550 Km
Suez Canal
Estimated containership transits in 2013: 17,000
Northern Sea Route
15,791 Km
Containership transits in 2013: One
Danger: ICEBERGS and GROWLERS
The economics of the Northern Sea Route
The traditional route…..with traditional issues
A saving of 3,759 km
…translates to REAL savings in
TIME and BUNKER costs
Sources: Northern Sea Route Information Office, Danish Institute for International Studies March 2009 Map courtesy of SWmaps.com
MARSH
But, the Northern Sea Route is not alwaysthe shortest route
Distance in kilometres
ROUTE NSR Via Suez Difference
London Yokohama 13,841 21,200 -7,359
Rotterdam Shanghai 15,793 19,550 -3,757
New York Shanghai 19,893 22,930 -3,037
BUT …..
Marseilles Shanghai 19,718 16,460 3,258
Rotterdam Singapore 19,641 15,750 3,891
Barcelona Hong Kong 20,686 14,693 5,993
New York Singapore 23,121 18,770 4,351
+
+
+
+
Sources: Northern Sea Route Information Office, Danish Institute for International Studies March 2009 Map courtesy of SWmaps.com
MARSH
Panama Canal Route
Sources:Map courtesy of SWmaps.comDanish Institute for International Studies March 2009
NorthwestPassageRoute
12,850 KmThe economics of the Northwest Passage
Vancouver / Seattle
Rotterdam
16,400 Km
October 2013The first commercial transit of the NW Passage. The 75,000 DWT bulkcarrier, NORDIC ORION sailed from Vancouver to Finland, saving a week off the journey time (via Panama) and an extimated $80,000 in fuel costs.
October 2013The first commercial transit of the NW Passage. The 75,000 DWT bulkcarrier, NORDIC ORION sailed from Vancouver to Finland, saving a week off the journey time (via Panama) and an extimated $80,000 in fuel costs.
The Northwest Passage would reduce the distance from Shanghai to Rotterdam (Via Panama) from25,588 Km to 17,570 km
The Northwest Passage would reduce the distance from Shanghai to Rotterdam (Via Panama) from25,588 Km to 17,570 km
A saving of 3,550 km
……and remove the Panama Canal fees……and remove the Panama Canal fees
MARSH
Sources: Map courtesy of www.SWmaps.com*Reuters, Northern Sea Route Information Office, National Snow and Ice Data Center, Lloyds List, Wall Street Journal,http://mscconference.wordpress.com/2013/08/29/the-northern-sea-route-is-heating-up/
Hull underwriters don’t like ice!Institute Warranties (1976)and International NavigatingConditions (2003)….
… and the exclusions go much further.
Generally (except northern Norway), insurance cover anywhere above 70º N. is excluded.
There is not a lot of the NSR that hull underwriters normally cover…
….and none of the Northwest Passage.
MARSH
2013 Northern Sea Route statistics
Source: Northern Sea Route Information Office(http://www.arctic-lio.com/)
Cargo TypeVessels
EastboundVessels
Westbound
Total Number of
Vessels
Liquid (tankers) 23 8 31
Bulk 3 1 4
LNG 1 1
General 9 4 13
Ballast 1 14 15
Repositioning 4 3 7
Total: 41 30 71
DWT Eastbound
DWT Westbound
Total DWT
588,659 323,208 911,867
203,439 73,500 276,939
66,868 66,868
36,846 63,377 100,223
469,703
38,027
895,812 460,085 1,863,627
Total transit volumes during summer 2013
7
The average number of casualties each year inside the Arctic Circle* ?
2002 –2007 452009 –
2013 *Source: Allianz Safety & Shipping Review 2014
This was a 58% increase in vessel numbers from 45 (in 2012) to 71 (in 2013).
But cargo volumes (1.8m DWT) were only a fraction more than 2012 (1.4m DWT).
MARSH
Insurance issues - Hull
Source: Gard Insight 23 January 2014
The default position for Hull & Machinery cover is that there are no issues! (…. because there is no cover!)
Is there more risk?Engine breakdown - grounding/stranding - hull damage - heavy weather – fire.•Extreme cold can cause engine problems.•Reduced coverage by navigation aids (such as GPS, GALILEO).•Inaccurate charts and magnetic compasses are unreliable in such high latitudes.•Restricted visibility up to 90% of the time.•Inadequate weather reports and violent storms can occur at any time … and ice.
Salvage facilities?Icebreakers accompanying commercial vessels through the NSR are not salvage vessels and very few shore-based salvage support services are available for thousands of miles (especially in the eastern part of the NSR).
Even if salvage equipment could be employed, performing salvage work in often dark and inhospitable conditions would be a major challenge.•Underwater surveys of damage?•Pumps and other equipment may not operate in such conditions?•Lightering is probably not an option?•Temporary repair facilities non-existent?•A race against time?
MARSH
Insurance issues – P&I The default position for P&I cover is that there are no issues! (…. because there is arguably no cover!)
• Although P&I does not generally impose navigation limits, the Club rules (e.g. Gard’s Rule 7) require the Club to be consulted if a voyage does not fall within a vessel’s normal trading pattern, as the Association must be notified of any circumstance that may alter the risk covered by the club.
Is there more risk?
Wreck removal - pollution - Salvage (environmental) - crew injury and hospitalization.
• Wreck removal takes time and equipment.
Oil pollution presents huge problems.•Cold temperatures and ice affect the behaviour of oil in many ways (e.g. increased persistence).
•Oil can get trapped under ice, or be held within ice, until ice melts, many months later.•Oil booms often don’t work.•Burning (DEEPWATER HORIZON style) not likely to work in that environment.•Detecting / spotting oil drifts difficult – (Dark for so long).•Dispersants (delivery and chemical effects in such low temperatures, unknown).•Political and environmental sensitivity.
Source: Gard Insight 23 January 2014
This PowerPoint™ presentation is based on sources we believe reliable and should be understood to be general risk management and insurance information only.
Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.
© Copyright 2014 Marsh Ltd All rights reserved.
Registered in England and Wales Number: 1507274, Registered Office: 1 Tower Place West, Tower Place, London EC3R 5BU.
Marsh Ltd is authorised and regulated by the Financial Conduct Authority.