As conflicts in the Middle East and the blockade of the Strait of Hormuz disrupt global trade, a new study by Coface highlights that the Arctic route is attracting growing interest as a potential alternative.
However, the company said the commercial potential of the Arctic route “remains limited” in the short term despite changes in sailing conditions caused by climate change.
“Sea transport accounts for more than 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 noted in its new report.
The credit insurer continued: “The chaos in the Red Sea in recent months, coupled with tensions around the Strait of Hormuz and changes in international trade policy, particularly US policy, has highlighted this vulnerability.
“In this context, the Arctic route appears to be a theoretical alternative that could significantly reduce the distance between East Asia and Northern Europe by up to 40% and the distance to the east coast of North America by approximately 20%. The increased navigability of the Arctic route due to climate change raises questions about its economic viability.”
Coface said it assessed the economic viability of Arctic routes by comparing the unit shipping costs of these routes with traditional corridors, across two main routes – Asia-North Europe and Asia-North America – and three main ship classes: tankers, bulkers and container ships.
According to reports, within five years, the Arctic route will still be mainly dedicated to transporting raw materials.
For liquid bulk, the cost savings are particularly significant, with cost reductions of up to 45% to 50% in some cases, Coface said. At the same time, dry bulk cargoes may also become competitive, but mainly when ships can operate without icebreaker escorts.
In contrast, container shipping remains uncompetitive despite shorter distances.
“At this stage, operational constraints, limited ship sizes and the specific costs of Arctic navigation make it impossible to compete with the economies of scale of traditional routes,” Kofas said.
The credit insurer added: “In total, only 3.5% of trade between East Asia, Northern Europe and North America may actually use the Arctic route. Therefore, their overall impact on the global trade map will remain limited in the short term.”
“While Arctic routes have the advantage of distance, their development still faces significant constraints. Navigation windows remain seasonal, ice conditions remain variable and unpredictable, and the use of icebreakers is often essential.
“As a result, the Arctic has primarily become an arena for increasing strategic competition. The Northern Sea Route remains primarily controlled by Russia, while China is gradually strengthening its presence and polar capabilities. The United States is also seeking to increase its influence in the region.”
“Arctic sea routes are of interest because they shorten distances. However, commercial interest in the coming years will remain very limited and focused mainly on raw materials,” said Eve Barré, industry economist at Coface.
