With the conflict in the Middle East and the blockade of the Strait of Hormuz disrupting global trade, a new study from Coface has highlighted that Arctic routes are attracting growing interest as potential alternatives.
However, the firm has suggested that the commercial potential of Arctic routes will “remain limited” in the short term despite changes in navigation conditions due to climate change.
“Maritime transport accounts for over 80% of global trade, concentrated between three major regions – East Asia, Europe and North America – and structured around a limited number of strategic corridors. This concentration makes global trade particularly vulnerable to geopolitical shocks,” Coface observed in its new report.
The credit insurer continued, “The disruptions observed in recent months in the Red Sea, combined with tensions around the Strait of Hormuz and changes in international trade policy – particularly US policy – highlight this vulnerability.
“In this context, Arctic routes appear to be a theoretical alternative, significantly reducing distances – by up to 40% between East Asia and Northern Europe, and by around 20% to the east coast of North America. Their increased navigability due to climate change raises the question of their economic viability.”
Coface said it assessed the economic viability of these routes by comparing unit transport costs on Arctic routes and traditional corridors across two major routes—Asia–Northern Europe and Asia–North America—and three main vessel categories: tankers, bulk carriers and containerships.
Over a five-year horizon, Arctic routes will reportedly remain primarily dedicated to the transport of raw materials.
Coface stated that cost savings are particularly significant for liquid bulk, with reductions of up to 45% to 50% in some cases. Meanwhile, dry bulk may also become competitive, but mainly when ships can operate without icebreaker escort.
Conversely, containerised transport remains uncompetitive, despite the shorter distances.
“Operational constraints, the limited size of vessels and the specific costs of Arctic navigation prevent it, at this stage, from competing with the economies of scale of traditional routes,” Coface observed.
The credit insurer added, “In total, only 3.5% of trade between East Asia, Northern Europe and North America is likely to actually use Arctic routes. Their overall impact on the global trade map would therefore remain limited in the short term.”
“Whilst Arctic routes offer a distance advantage, their development nevertheless faces significant constraints. Navigation windows remain seasonal, ice conditions remain variable and unpredictable, and the use of icebreakers is often essential.
“The Arctic has thus primarily become an arena of growing strategic rivalry. The Northern Sea Route remains largely controlled by Russia, whilst China is gradually strengthening its presence and polar capabilities. The United States, too, is seeking to increase its influence in the region.”
Eve Barré, sector economist at Coface, said, “The Arctic maritime routes are attracting attention because they shorten distances. However, the commercial interest – over the next few years – remains very limited and is concentrated mainly around raw materials.”
