Shipping still transports the vast majority of products around the world. The longer the journey the more it costs per item. And China ships more physical goods than any other country to Europe. But the attacks on shipping in the Red Sea by Houthi pirates means the Suez canal is being used less and less - forcing containers down via the Cape of Good Hope. But now climate change and technology means that increasingly China is sending ships via the North Pole to Europe which takes around 20 days rather than 50 days via South Africa. So is this the new route of choice from the Far East?
I spoke to Malte Humpert, is an investigative journalist for High North News and gCaptain
https://open.spotify.com/episode/1ab02v5YWeiVkzdTlVUeHW?si=Unvkq3LdTdis4eA6g54M0A
TRANSCRIPT
Speaker 1 (00:00):
We'll talk about the Arctic in a moment, but is the route from China to Europe via the Suez Canal fully stopped or just reduced?
Speaker 2 (01:01):
It's currently just reduced. It's been going on for about two years, and it's down about 50% in terms of vessels passing through. It differs a little bit by category. Oil tankers and liquified natural gas tankers are down a little bit less compared to container ships. It really depends on how risk averse companies are. So major western operators tend to avoid it. And then there's some operators out of China, for example, that still take the route, but they have armed security or they get escorts vessels. It's definitely changed over the last two years since the Houthis Rebels started.
Speaker 1 (01:39):
And of course that makes it all more expensive if you have to have armed security and potentially even a Navy guiding you to the sewers canal. So it means that a lot of shipping from the Far East is going via South Africa, which is quite a long journey.
Speaker 2 (01:53):
Long, that's correct, yeah. And insurance rates are going up as well, and that's kind of where the Arctic comes into play. In the past, a lot of experts were saying, oh, the insurance rates are higher if you go through the Arctic. But the same thing is happening in the Suse Canal region now. And so between climate change and geopolitical developments and other parts of the world, the Arctic is kind of squeezing in, kind of seeing what kind of potential does the Arctic offer in terms of shipping?
Speaker 1 (02:23):
Yeah. Is it a realistic option? IE do you need very specific ships with icebreaker kit at the front of them to break through, or is there now a developed channel through the North Pole?
Speaker 2 (02:37):
It really depends on when you want to go. If you want to go in the middle of winter, then it still remains frozen. You still need nuclear ice breakers that Russia operates to kind of keep minimal shipping lanes open. But increasingly, due to climate change over the last two decades, we've lost about 50% of the ice extent going back 1980s, nineties. Really it was just the domain of those nuclear icebreakers to resupply military installation, some local population centres. But yeah, with 50% less ice, you're looking at mid-July into late October, early November. It differs from year to year. It's kind of like the distinction between weather and climate. Just because the climate is getting warmer, you can still have a really cold winter, and the same thing can be true in the Arctic, but by and large now you have that three to four month window now where you can send regular ships or vessels that have minimal ice classifications through the Arctic.
(03:37):
And China is kind of at the forefront of it. Western companies are kind of shying away from it for environmental reasons, for political reasons. They don't want to be seen using a Russian transport route at the moment, but it, it's growing from a low base, and this is not going to revolutionise trade over the next five or 10 years. But I think China is thinking 20 50, 20 60, you kind of play the climate scenarios forward, and suddenly you don't have a three or four month shipping window. You might have a six or seven or eight month out of the year shipping window, and suddenly it becomes a lot more feasible. And in the meantime, until then, China is gaining experience figuring out what kind of equipment is needed, what kind of technology, what kind of training. You were mentioning the channel, there's different routing options you can take closer to the Russian coastline or a little bit further north. And so it's a big learning curve. I always compare to the exploration of the American West, right? First you had individual guys on horseback going out west, and then you had the waggon columns, and then eventually you built the railroad and it became more and more feasible as a main migration route. And so the Arctic is kind of at the beginning of this opening up process.
Speaker 1 (04:51):
And will eventually giant container ships be able to go through the Arctic taking hundreds of containers?
Speaker 2 (04:58):
Yeah, I mean, we already saw last week or earlier this week, we saw Istanbul Bridge, which is the first direct Arctic China, Europe Arctic Express. So it left China and within 20 days it arrived in the UK in Felixstowe. And the UK's largest terminal should have made it in 18 days. But there was a storm off the coast of Norway. So ironically, the Arctic was no problem. This was actually the fastest transit of any vessel ever to go through the Arctic. So this container ship did it in just five days at an average of 17 knots. So just thinking about that, that a container ship can go full speed through the Arctic, doesn't have to worry about running into Titanic style icebergs. So 20 days carried about 5,000 containers. It's not one of the major giants. The biggest container ships these days carry an excess of 20,000 containers.
(05:55):
They're relying on specific logistics. If you get a package delivered by a delivery company, they don't just bring one package from point A to point B, they have a big truck. And so there's a lot of logistics involved, which makes the Arctic not quite feasible today for major operators. But those smaller niche operators that operate medium-sized vessels, they see the benefit of just cutting 20 or 30 days off the voyage. And I think eventually the question is when large operators see that it is becoming feasible and that smaller operators are making money, that's going to be that question. When do you reach that tipping point where political or environmental considerations take a backseat to making money?
Speaker 1 (06:40):
That's it. And eventually there will be those people who won't care about whether they're making things worse environmentally. Malta, thank you so much for joining us. That's Malte Humpert, an investigative journalist with High North News and G Captain. Back in a moment with the cloud computing giant workday.
