The future of the Northwest Passage

Chapter 1 Introduction Global warming has been causing the Arctic sea Ice extent to shrink over the past decennia (Deser, 2008). On top of that, the permafrost - which has been stationary for millions of years – has also started to thaw (ACIA report, 2005). Apart from the much bespoken negative consequences of global warming, it seems that the melting of Arctic sea ice might also have a positive effect; on shipping. Based on prior research performed in the field of Arctic shipping, this thesis will examine the economic viability of a new shipping route between the ports of Yokohama (the port city of Tokyo) and Rotterdam; the North West Passage (NWP). The NWP will carry ships from the Bering Sea to the Beaufort Sea, then traversing the Atlantic Ocean via the Arctic Bridge along the South Coast of Greenland to Europe. This new route will decrease the shipping distance between the two ports by approximately 3400 nautical miles (NM) to 7850 NM and thus will create an opportunity for shippers to save on fuel expenses. This thesis provides a cost-benefit analysis for several plausible developments in the maritime sector. A scenario analysis is conducted by identifying three parameters which are of importance to the viability of the NWP. For each of the three variables, three plausible expected future values are set. All possible combinations of these variables are examined and visualized in a matrix. The profitability of each scenario is computed upon having included additional (fixed) variables. The NWP scenarios will be compared to current practices based on expected annual profits. Shipping between Yokohama and Rotterdam currently takes place via three routes, namely, (1) the Suez Canal, (2) the Panama Canal and (3) Cape Horn. This thesis will primarily compare the NWP route with the Suez Canal route as it is currently the most used.