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Commercial transit through the northern sea route

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  • 1. Commercial Transit through the Northern Sea Route May 15th 2012 Professor S.W.Hong Institute of Global Logistics Youngsan University
  • 2. 2Contents1. Northern Sea Route (NSR)2. Future Demand of Transit shipping via NSR3. Current State of Affairs in the NSR Shipping4. Potential Cargo & Transit for Korean Market5. Korean Perspectives on the Arctic shipping
  • 3. 3Northern Sea Route
  • 4. 42. Future Demand of Transit Shipping via NSR1) High energy demand in Asian market2) Rising oil price3)Russian Arctic Resource development4) Arctic sea ice in decline due to climate change
  • 5. 53. Current State of Affairs in NSR Shipping1) Cargo traffic on the NSR2) Transit shipping through NSR (2011)3) Is Arctic shipping profitable ?4) Vessel operation conditions on the NSR
  • 6. 61) Cargo traffic on the NSR 5,0005,000 (est)4,000 (est) 3,0003,000 2,150 2,119 2,023 1,9562,000 1,718 1,801 1,8001,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 Europe  Asia Asia  Europe Major cargo Resources •Heavy cargo(beluga,2009) • gas condensate • Transit(drilling ship, Tug boat) • iron ore, scrap metal •Jet oil • non-ferrous metal • oil products
  • 7. 7Future NSR cargo traffic 19Mil(2015)  64Mil(2020)  85Mil(2030) (estimation, Ministry of Transport, Russia) Hydrocarbon resource development of Russian Arctic Project Product Year Cargo/MIL t Market Varandey Crude oil 2008 20 Europe, N.America Europe, N.America Prirazlomnoye Crude oil 2011 6.6 Shtokman Gas condensate 2018 7.5 Europe, N.America Kumzhin Gas condensate 2015 2.6 Pacific thru Suez South Tambey Gas condensate 2016 7.5-15 E, NA / Pacific thru NSR Kara Hydrocarbons 2027 N.A. N.A. source: GECON, Mikhail Grigoriev (2011.4)
  • 8. 82) Transit shipping through NSR (2011)• Commercial transit rigorously began• Transit : 34 times (4 times in 2010) 1) International transit : 13 times (resources) 2) Russian coastal traffic : 11 times (fish, fuel, etc)• Ballast : 10 times• Operation period: 4 months• Total transit cargo volume: 820,000 ton (Source: Rosatomflot)
  • 9. 9 Commercial Transit through the NSR (2010, 2011) Vessel Cargo Operation icebreaker Duration (Average speed 22.5daysMV Nordic Barents Iron ore Kirkenes  Lyanyungang Atomflot (12.03knot) Non-ferrous Dudinka  Busan No escort Monchegorsk Metal (Norilsk Nickel)  Shanhai Dudinka (Arc7) Sep-Oct Perserverance gas condensate 6/30-7/15 MurmanskNingbo Yamal, Taimir (flag Singapore) (NOVATEK: 59,981t) (7.6knots)Vladimir Tikhonov gas condensate 8/23-30(7.5days) Murmansk  Ningbo Atomflot (flag Liberian) (NOVATEK: 120,843t) (14knots) STI Heritage gas condensate July/21-29 Murmansk -> Map Ta Phut(Thai) Atomflot(Marshall Island) (NOVATEK: 60,944t) (14knots) Sanko Odyssey Iron ore (66,500ton) (flag Liberian) (Eurochem) Murmansk  Xingang Atomflot(Taimir) Aug/31-Sep/23 Stena Poseidon Gas condensate Murmansk  Korea Atomflot Aug 30-Sep (flag Finland) (NOVATEK: 57,814t) gas condensate Mariann (NOVATEK: 61,259t) Vitino  Incheon Atomflot Sep 20-Oct11 Perseverance Jet fuel Korea Onsan -> Le Havre 50 years Victory Aug 31- (flag Singapore) (64,500ton)
  • 10. 10Test shipping of V. Tikhonov by SCF (Aug 2011) Novatek, Gas condensate 120,843ton, Time on NSR: 7.4days, Average speed: 14.0
  • 11. 11Some results of Transit shipping on the NSR• Novatek’s export of gas condensate to Asian market (China 5, Korea 2, Thailand 2)• Vessel Perseverance’s transport of gas condensate & jet oil (return cargo : jet oil from Korean refining companies )• Korean shipping companies’ lack of operational experience on arctic shipping
  • 12. 12Implications of Transit shipping on the NSR1) Transit shipping of Russian Arctic Resources to Asian Market - Arctic resources for revival of Chinese northeastern region2) Promotion of Russian Arctic Resource to the Asian Market • Case 1 (2010): SCF tanker ‘Baltica’(117,153ton) - Gas condensate from Vitino (Russia) to Ningbo (China) • Case 2 (2011): SCF tanker ‘Vladimir Tikhonov’ -Gas condensate (120,843ton) from Honningsvaag (Norway) to Man Ta Phut(Thailand)
  • 13. 13Implications of Transit shipping on the NSR3) Vessel operations by experienced Russian & Nordic shipping companies (Norway, Sweden, Finland, Denmark)4) Most of Cargoes transported through NSR mainly limited to Russian Arctic Resources (Gas condensate iron ore, etc)5) Activation for international transit shipping ?
  • 14. 143) Is Arctic shipping profitable ? Fuel price Icebreaker service Insurance Return cargo
  • 15. 15Tariff for Icebreaking service• Is tariff negotiable ?• Current market price• The more cargo traffic flows on the NSR , the higher possibility we pay less than ever
  • 16. 16 Maximum rates for icebreaker services (2011.6.7)№ Nomenclature of cargo Unity Rate 1 General cargo Roubles per ton of nominal gross mass1.1 Cargo, transported in standard containers 1048,0 of container1.2 Non-ferrous metal Roubles per ton 2050,01.3 Converter matte Roubles per ton 1905,0 Products of mechanical engineering and instrument-making1.4 Roubles per ton 2464,0 including equipment and parts thereof1.5 Vehicles, cars and their parts Roubles per ton 2576,01.6 Articles out of metals of industrial purpose Roubles per ton 1747,01.7 Others Roubles per ton 1048,02 Bulk cargo Roubles per ton 707,03 Bulk liquid cargo Roubles per ton 530,04 Timber cargo:4.1 Round lumber Roubles per ton 118,0 Saw-timber and other products of timber, woodworking,4.2 Roubles per ton 148,0 pulp and paper industry
  • 17. 4. Potential Cargo & Transit : Korean Market
  • 18. 181) Cargo traffic between Asia and Europe  Cargo traffic increases since 2008 crisis  Cargo traffic over 100 mil ton between Asia 3 & EU 140 MIL 120 100 80 China Japan 60 Korea Total 40 20 0 Eurostat(MT) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
  • 19. 19 1) Cargo traffic between Asia and Europe  Promising cargo transportation  Korea imports crude oil & export oil products NSR EU   EU Product(2009)SITC Containeriza Tariff (unit: Mil Euro) tion ratio ($) Japan China Korea Japan China Korea 24 Cork and wood 6.1 3.9 451 148 236 27 Crude fertilizers 23.6 23.5 222 310333 Petroleum, crude oil low 17.6 141 Coal, coke and 32 briquettes low 23.5 138334 Petroleum products 0.5 17.6 1,195+335
  • 20. 20 1) Cargo traffic between Asia and Europe  Export & import of Chemical & iron product is salient  Road vehicles difficult due to high NSR tariff EU   EU Containeri NSR Product(2009)SITC zation Tariff (unit: Mil Euro) ratio ($) Japan China Korea Japan China Korea 51 Organic chemicals 19.9 23.5 2,344 2,351 888 1,750 2,904 57 Plastics in primary forms 19.9 23.5 473 2,347 617 289 583 Chemical materials 59 and products 19.9 23.5 784 1,149 548 52 Inorganic chemicals 19.9 23.5 266 625 78 Road vehicles 22 85.8 3,749 8,188 12,230 2,902 3,330 67 Iron and steel 1.3 58.1$ 2,120 1,023 1,857 1,115source: eurostat, External intra-EU trade-statistical yearbook, 2010 edition
  • 21. 21 1. Crude oil and related cargo 2. Iron and steel 3. Petroleum products/chemicalPotential Cargoes product by using NSR 4. Coal 5. Wood and its products 6. Road vehicles 7. Fertilizers
  • 22. 222) Potential Cargo: Korea’s import from Russia Import increase of Russian coal, crude oil & natural gas source : kita.net(MT) item 2009 2010 Coal 4,719,780 8,557,320 Crude oil 3,693,571 6,726,704 Natural gas 1,016,914 2,932,807 Petroleum and its products 1,457,799 1,172,735 Steel waste & scrap 534,672 781,451 Steel ingot & its semi processed products 472,078 592,245 Pig iron & sponge iron 472,078 592,245 Fish(fresh, refrigerated, frozen) 212,369 262,711 Aluminum 246,031 197,057 lumber 384,128 185,203 Processed log 88,292 165,884 Pulp & waste paper 120,302 156,488
  • 23. 232) Potential Cargo: Korea’s export to Russia source : kita.net(MT) item 2009 2010 Motor cars and other motor vehicles 482,960 1,151,779 Acetal resin , polyether & epoxy resin 144,818 112,726 Petroleum oils and oils obtained from bituminous 43,244 101,875 minerals (other than crude); preparations lime, cement & building materials 154,194 60,083 Vessel, boat & floating structure 45,354 59,234 Polymer Ethylene (primary product) 117,448 47,034 Poly stylene (primary product) 67,110 46,634 Miscellaneous edible products and preparations 55,740 44,559 Parts and accessories of the motor vehicles 126,878 39,848 Polymer of vinyl chloride or of other halogenated 44,366 34,968 olefins, in primary forms Flat-rolled products of iron or non-alloy steel, 39,586 32,625 clad, plated or coated
  • 24. 243) Promising cargo (in case of using NSR) Gas condensate (Import) Russian raw materials (import) Steel products (export) Heavy cargo (export)
  • 25. 5. Korean Perspective on the Arctic shipping
  • 26. 26Korean Government’s Arctic Strategy(Ministry of Land and Maritime Affairs, Korea)1) Long-term- Participation in Arctic resource development & Maritime transportation (since 2008)2) Mid-term- Development of ice classed vessels : Arctic expedition by research icebreaker ‘Araon’(2010)- Ice navigation crew training (2012)3) Short-term- test shipping (2012)
  • 27. 27Korean Activities in the Arctic shipping1) Korean shipping companies - Study on the economic viability of the arctic shipping2) Korean shipbuilders- building offshore facilities (Ice class LNG carrier, platform, floating units, drilling ship, etc)3) Korean research institutions- Economic analysis of NSR & Suez Canal- Analysis on the resource transportation
  • 28. 28Korea-Norway Cooperation in Arctic shipping• Norway’s extensive experience and knowledge in Arctic shipping• Maritime cooperation in Arctic shipping• Business opportunities through NSR - Commercial business : raw materials - Project business : offshore facilities
  • 29. 29 Busan in Northeast Asia3-hour Flight Radius 20% of World’s GDP 25% of World’s Population 33% of World Container Volume Logistics Hub Largest Manufacturing Base 3rd Largest Economy
  • 30. 30North & New Port 6 Terminal Operators 4 Terminal Operators (20 berths) (18 berths)
  • 31. 31 2011 World’s Top 10 Container Ports Busan shows the highest growth rate!!(Unit : 1’000 TEU, %) T/Put Growth Rate 31,500 29,938 15.0% 30,000 14.0% 13.4% 24,404 22,570 25,000 11.7% 11.3% 10.0% 20,000 9.3% 16,175 8.9% 14,686 14,400 15,000 13,020 11,900 12,800 6.0% 5.3% 5.0% 10,000 3.0% 5,000 0 0.3% 0.0% Source: Busan Port Authority (BPA) 31
  • 32. 32Potential of Busan port• Logistics Hub of Northeast Asia• Located near the Main Trunk Route of eastern part of NSR• Best logistics Service (5th world Container Port)• Provision of Ship repairing service• Provision of fuel supply• Distribution center for ship supply• Oil Hub Port (Ulsan) located near Busan Port• World’s best shipbuilders located near the Greater Busan area• Governmental support
  • 33. 33 Ulsan Port  Liquid Logistics Hub of Northeast Asia Korea’s No 1 Liquid cargo port• Liquid cargo traffic (Korea’s No 1) (handling 35% in Korea)• Cargo traffic(World’s 17th, 2010) China• Import of Crude oil , No 1 in Korea (52%) Seoul Korea• Car production (World’s No 5) Busan Ulsan• Largest Reservoir tanks infra in Japan Korea• Exports and imports (2011) (export: 70.4 bil $, imports:81.2bil$)
  • 34. 34Ulsan Port’s 59 liquid cargo berths
  • 35. 35World’s major liquid logistics port Unit : K ton Antwerp : 40,482 Rotterdam: 209,400 Amsterdam : 36,106 • Antwerp • Rotterdam Ulsan : 136,362 • Amsterdam Ulsan • Houston • South Louisiana • Singapore Houstin: 125,491 Singapore: 176,262 South Louisiana: 132,075Source : Ulsan Port Authority, 2010
  • 36. 36Thank you !

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