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2 Weeks Quicker & Cheaper

Over the last two weeks the Northern Sea Route has fully opened with many shipping companies seemingly interested. The problem is the sanctions imposed on Russia plus how these shipping companies are viewed politically. This however is more about being practical considering how shipping costs have escalated since the Red Sea crisis.

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Container leases are available, but the pricing varies significantly from port to port plus certain ports have higher volumes available than others.

Higher container rates especially with the pick up fee has seen a rise from $200 per 40ft to $1060. This is due to some ships travelling round the Cape Of Good Hope which ties up containers much longer than normal. The spot pricing in Shanghai this month for containers is at a high of $2300 which is paid for by the client over and above the normal shipping fees. This is why imported goods are so expensive these days as we the consumer are paying for these fees.

Another factor favoring the Northern Sea Route which is kind of an own goal is that due to the NSR being a much shorter journey by around 2 weeks less this means shipping companies reduce their carbon emissions. No one really saw that angle and moving forward with Europe enforcing their Carbon Border Adjustment Mechanism (CBAM) from January 2026 this will become a major factor. I can see many companies favoring goods transported along this route due to the lower costs once carbon emission taxing is enforced.

Russia has a target of 71 million tons of goods to flow through the NSR this season, but realistically they are only looking at around 40 million tons. There are a number of factors influencing the smaller volume with the main one being safety. Putin pledged $7.7 billion earlier this year which would provide air and sea rescue support, but that has not materialized as yet.

There are still a lack of ice hulled ships because even though the route is "ice free" there is still some ice that could easily damage or sink a vessel without the required hull thickness. There are some parts of the route that still require an ice breaker in attendance and if your ship is not of the right hull classification you cannot use this route safely. This year 3 Chinese shipping companies have applied for passage compared to only 1 last year. The shipping shortage of ice classified vessels is still a major factor in what is holding this shipping route back.

This year the Russians have been exporting coal via the NSR and the benefits are in the savings with the shipping fees saving importers $7 per ton. If you consider a ship can carry 150 000 tons that is over $1 million saved in fees alone and you receive the shipment far quicker due to the journey time being nearly cut in half.

Posted Using InLeo Alpha