Market News

 August 20, 2013
China reveals its Arctic ambitions in new shipping route

 The maiden voyage to Europe by a Chinese merchant ship through the Northeast Passage will help the world's biggest exporter speed goods to market and is a symbol of Beijing's strategic ambitions in the Arctic.

The emerging Arctic Ocean shipping route north of Russia has been opened up by global warming and cuts thousands of kilometers --- and many days --- off the journey from China to its key European market.

A vessel owned by Chinese state shipping giant COSCO left the northeastern port of Dalian last week bound for Rotterdam in the Netherlands, on a 5,400-km voyage that state media said would take just over 30 days.

That is up to two weeks faster than the traditional route between Asia and Europe through the Suez Canal, according to COSCO.

"It's potentially going to change the face of world trade," said Sam Chambers, editor of SinoShip magazine.

"The Chinese will use the Arctic route in a very big way. It's all about having options, having alternatives in case of emergency," he said.

But China is also eyeing the Arctic for better access to resources to fuel the world's second-largest economy, such as the natural gas reserves held by political ally Russia in the region.

China --- which does not border the Arctic and has no territorial claim to any of it --- also recognizes the area's potential for scientific research and its strategic value as what one Chinese analyst who did not want to be named called "military high ground."

The commercial shipping route is only open for about four months a year as the melting of polar ice resulting from global warming makes it more accessible.

Three months ago, China gained observer status in the Arctic Council, a group of nations with interests in the region that is believed to hold rich mineral and energy resources.

The council's eight full member states are Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States.

"The opening of the new shipping route indicates China is participating more in Arctic Ocean affairs," said Zhang Yongfeng, a researcher at the Shanghai International Shipping Institute.

The European Union is China's biggest export destination with €290 billion ($385 billion) in goods sold last year and COSCO, China's largest shipper, described the new service in purely commercial terms, saying it will slash shipping times, thus cutting costs and fuel consumption.

"The Arctic route can cut 12 to 15 days from traditional routes so the maritime industry calls it the 'Golden Waterway' " COSCO said in announcing the journey.

The company's 19,000-ton ship Yong Sheng --- which is carrying a mixed cargo, including heavy equipment and steel --- is expected to pass through the Bering Strait later this month and dock in Rotterdam in September, it said.

"It will change the market pattern of the global shipping industry because it will shorten the maritime distance significantly among the Chinese, European and North American markets," Dalian Maritime University professor Qi Shaobin told state media.

But analysts said developing the route would take time --- while lack of infrastructure raised worries over contingencies for potential emergencies.

"In the near term, the economic value for shipping is definitely not big," said Zhang, of the Shanghai International Shipping Institute. "The navigable period of the passage is relatively short . . . while the port and pier infrastructure along the route is incomplete."

China is seeking to grow markets in southeast Asia and Africa, so more trade might flow to the south, lessening the importance of the Arctic route, he added.

China's total foreign trade volume was $3.87 trillion last year.

But some Chinese estimates claim between 5 and 15 percent of the country's international trade could use the Arctic route within a mere seven years.