An Economic Analysis of Container Shipping Through Canadian Northwest Passage

Abstract

Over the last 30 years the extent of sea-ice covering the North Pole has declined about 15∼20% on average, and it is expected that by the end of the 21st century, vast areas of the Arctic Ocean will be ice-free during the summer season, thus, increasing the possibility of ship navigation across the Arctic Ocean.

In this paper, we have developed a model of shipping for the Northwest Passage (hereinafter NWP) in northern Canada to determine whether ice thinning will make this route more economically viable when compared with the Panama Canal. Among the 7 routes of the NWP, Route 2 and Route 3 offer better navigational conditions than the others. However, Route 3 has a depth limit of only 10m, so here we use Route 2 which is suitable for deep draft navigation to carry on our analysis. Container ships of 4,500∼15,000 TEU under Hub and spoke mode, container shipping between Busan port and New York port is simulated for the Panama Canal and the NWP.

This paper considers Canada's sovereignty in matters of navigation over the waters at the Arctic Archipelago, in the form of a toll fee for passage usage. We concluded that the NWP has an advantage over the Panama Canal if it is open for free international passage, regardless of ship size. However, if it is not free, its advantages depend on its toll fee. The lower the toll fee is, the more advantages the NWP will boast.