China Europe Arctic Express

There is so much going on in the world right now that is not being reported on because it does not fit the mass media narratives. The news is being centered around the United Nations and there objectives taxing global shipping for carbon emissions. The country this would effect most would be China as they have a 50% market share/ownership of all vessels on the high seas.

Last week Russia and China signed an agreement to cooperate and expand the Northern Sea Route which is rather significant. I say significant as the Northern Sea Route is Putin's baby and I do think he has come to terms this project is too big for Russia to handle on their own. Over the years Putin has been very protective over this trade route which is covered in ice for nearly 70% of the year. Russia has been wary of China due to their ship building capabilities and for them to build a fleet of ice breaking ships along with a fleet of ice grade container ships would happen very quickly. The Russians on the other hand take a few years to build one nuclear ice breaking ship and they need far more. Putin needs the Chinese onboard to help open the route up making it a 12 month transiting route.

The disruption caused by Yemen with world shipping was not about Israel and was more about diverting ships to seek an alternative transit route namely the Northern Sea Route and this did not materialize as planned. A percentage of vessels even travelled around the Cape adding to their costs and time so the Northern Sea Route was never part of their thoughts or plans. China owning 50% of all the vessels in the world will be told to use this route by their government now that China has signed this cooperating agreement. The Suez Canal will be the biggest loser from this deal.

The Northern Sea Route could be run all year round if there are enough ice graded ships ready to use this route. An ice grade ship for those that are wondering is a ship that has been specifically designed and manufactured with a reinforced hull to sail through ice. Not necessarily to sail through solid ice, but that is what the nuclear powered ice breaking ships do by clearing a path for these ice graded ships to them sail through. If these ships get stuck and need assistance which does happen frequently due to not having enough ice breakers then they would not sink like a normal ship would.

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20days vs 45-50 days is time and savings you cannot ignore.

The timing of this Russia China deal could not have happened at a better time especially after a Chinese container ship company tested out the route for the first time docking in Felixstowe, England on Monday this week.

This was the first Chinese owned ce-1 ice-class containership to navigate this route and covered the riskier part of the route in 5 days and covering the entire journey from Ningbo-Zhoushan, China to Felixstowe (UK) in 20 days. This 7500 nautical mile trip is shorter than the 11 000 nautical mile trip via the Suez Canal that takes an average of 45-50 days to complete.

What is important to understand about using this route is shipping companies can have 40% less ships/inventory doing the same business they are doing now. In the same breath they could grow their existing business by 40% with the same number of ships they currently own if they were the ice graded ships. Not surprisingly the Chines company is dubbing this route the "Arctic Express" and is now expanding adding more ice graded container ships to their fleet.

Up till now the risks have been too high with not enough back up support for vessels along this route. Now that China is fully on board this route will expand rapidly and will grow from a niche route which only saw 100 container ships transit this route last year whilst the Suez Route had 13000 vessels.

The United Nations with their carbon taxing objectives of world shipping has tried to prevent ships using this Northern Sea Route by applying a specific type of fuel used on the vessels transiting the arctic. If the Chinese want to make this route more profitable then they are going to have to adhere to whatever green code that fuel might be, but they will save up to 50% in shipping costs undercutting the bigger shipping lines leading to world dominance. Maersk and the other giant shipping lines will be under threat and will have no ither choice ,but to start using this "Arctic Express" route. Putin's baby will become a reality even though it has taken many years to get to this point.

Posted Using INLEO