Maersk’s new Arctic trial route away from the Suez Canal: “Not currently viable commercial alternative”

We do not see the Northern Sea route as a viable commercial alternative to existing East-West routes, Maersk says (Photo courtesy of Maersk)

News about global shipping giant Maersk trying out a new route via an Arctic sea route has been making the rounds, with some seeing it as the start of moving away from relying on the Suez Canal in global trade movement.

However, that is not set in stone – yet.

Maersk’s comment
A Maersk’s spokesperson tells Business Forward that the route around Russia’s northern border is a “one-off trial designed to explore an unknown route for container shipping and to collect scientific data – and not the launch of a new product.”

The passage is only feasible for around three months a year

When planning the shipping routes, several factors are taken into account, according to the spokesperson. “Currently, we do not see the Northern Sea route as a viable commercial alternative to existing East-West routes. Today, the passage is only feasible for around three months a year,” she explains.

In terms of cost for the company to ultimately change its route far away from the Suez Canal, there are several factors that will initially drive up the cost of investment in the new route. Given that the company is fond of innovation that ensures cost-effectiveness, as per the spokesperson, the new route may present a challenge.

“We […] must consider that ice-classed vessels are required to make the passage, which means an additional investment. We, of course, also want to have a product which is cost-efficient enough to generate a reasonable return,” Maersk states.

The numbers
To put things into perspective, the Suez Canal Authority (SCA) announced that a total of 17,550 vessels have passed the Suez Canal in 2017. Of those, 181 vessels belonged to Maersk, making 1,039 calls, equivalent to 6% of the total ships passing the canal. In total, the Suez Canal’s revenues reached $5.3 billion in 2017.

Suez Canal statistics for 2017 (Courtesy of Suez Canal Authority)

This year and up until July, 164 Maersk vessels crossed making 664 calls. As it seems, at this pace the total amount of Maersk ships will have increased compared to 2017 until the end of the year.

Maersk operates its largest ships – the Triple-E vessels – through the canal on its East-West trade route. These container ships can carry about 196,000 dead-weight tonnage (DWT). DWT is the sum of the weights of cargo, fuel, fresh water, ballast water, provisions, passengers and crew.

At the current toll price of the Suez Canal, laden container ships over 50,000 tons are charged at 2.05 special drawing rights (SDR) per ton, which is equivalent to $1.4 per ton.

Of course, the exact amount of dues any vessel crossing the canal owes the authority varies according to tiers, routes etc.

The conclusion
“In today’s fast-paced world, companies that want to lead must innovate […] The trial will offer us a unique opportunity to gain operational experience in a new area and to test vessel systems, crew capabilities and the functionality of the shore based support setup,” the Maersk spokesperson highlights.

Additionally, many different factors need to be taken in account when planning shipping routes, especially trading patterns and population centres, she says.

“We need to consider customers’ needs in terms of port coverage and transit time. In addition, weather and fleet or respectively vessel possibilities need to be considered,” Maersk concludes.

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