Major shipping companies Hapag-Lloyd and MSC Step Away From Arctic Shipping

Venta Maersk
Venta Maersk container ship along Russia’s Northern Sea Route during September 2018. (Source: Courtesy of Maersk)  
Hapag-Lloyd and MSC are the latest shipping companies saying they will not ship via the Arctic. Companies cite environmental concerns, but experts caution that appearing environmentally friendly may be primary driver. Will more companies, like Maersk and COSCO, have to follow suit in light of growing public concern for climate change and the environment?

As the polar sea ice continues to melt, new shortcuts, especially the Northern Sea Route along Russia’s Siberian coast line, have become available as seasonal shipping lanes. Earlier this fall, France’s CMA CGM container shipping company – the world’s fourth largest – became the first major operator to back away from shipping via the Arctic’s emerging shipping routes. The company cited environmental concerns of operating in the region’s challenging and vulnerable waters as primary impetus for its decision. 

In the weeks since, two other large transportation companies, Hapag-Lloyd (5th largest container carrier) and global logistics company Kuehne + Nagel, one of the largest freight forwarders, announced similar decisions. And with Mediterranean Shipping Company (MSC), the global number two, issuing a similar commitment yesterday, three out of the top five container shipping companies now rule out entering the region. 

Maersk, the industry’s leader who conducted an Arctic test voyage last year, and COSCO, the world’s number three whose vessels have completed around 30 voyages via the Arctic, have not given any indication about also ceasing shipping via the Arctic. Together the top five companies account for more than half of global container ocean freight.

Can other shipping companies afford to remain silent on the issue or will pressure from a public demanding stronger action against climate change lead to a de facto self-imposed ban of Arctic shipping?

Little financial costs to stepping away

From today’s perspective giving up on Arctic shipping has little financial cost as container shipping via the region is at least a decade or more into the future, experts say. “Safe and reliable container ship traffic through the Northern Sea Route is unlikely to be possible for another decade, perhaps more,” explains Michael Byers Professor and Canada Research Chair in Global Politics and International Law at the University of British Columbia. He also cautions that the potential for Arctic shipping is so long into the future and that "no company considers itself bound by 10 year-old announcements.“

Similarly, Frédéric Lasserre Professor, at the Université Laval Québec, surmises that the expected ban of cheap but dirty Heavy Fuel Oil in the Arctic by the International Maritime Organization, will make any form of container shipping economically unviable. “Should shipping companies be forced to use more expensive Marine Diesel/Gas Oil instead of HFO, then the profitability of Arctic transit would seriously be compromised,” Lasserre explains. 

“Zero-cost ‘Greenwashing’ ”  

The global shipping sector is a major and growing source of greenhouse gas emissions. Recently companies like Maersk and CMA CGM have announced long-term strategies to switch to cleaner-burning fuels and new engines types to reduce harmful emissions. In an age of growing public awareness about the impact of industrial activity on the global climate, shipping companies are no exception to efforts to operate, or at least appear, more environmentally friendly. In this regard, stepping away from the Arctic may be the lowest-hanging fruit.

This may be especially true for those companies who have not conducted any test voyages and did not believe in the commercial viability – at least in the short term – of Arctic shipping to begin with. “It is hard to say, once again, if the environmental concerns that are put forth are genuine or if they are a PR argument that covers a raw economic calculation,” hypothesizes Lasserre.

Byers refers to this tactic as Greenwashing, a practice that allows a company to appear more environmentally conscious than it really is. “This might be an example of zero-cost "greenwashing," whereby a company can make itself seem environmentally responsible without actually sacrificing anything,” he explains. 

Will other companies follow suit?

When CMA CGM’s announced its decision as the first major operator to back away from the Arctic in August, experts wondered if other companies would follow in its path. It appears the combination of limited economic cost and potentially significant public relations gains represents a suitable combination for a growing number of companies. The question is when or if companies who  already have a vested stake in Arctic shipping, namely COSCO and to a lesser degree Maersk, will follow. 

“Pressure is for sure building for [Maersk] to take position. Will it follow suit and also give up, or will it buy time in the hope its possible dialogue with Rosatomflot will possibly result in a profitable ad-hoc service,” Lasserre explains. 

Maersk responded to HNN that it "does its utmost to minimize the negative impact on the environment" and also referred to its efforts to become CO2 neutral by 2050. The company further added that "it does not currently see the Northern Sea Route as a viable commercial alternative to existing east-west routes."

Environmental activists also see these latest development as a step in the right direction. "There is clearly an emerging realization that the risks of a heavy fuel oil spill or the impact of increased black carbon emissions in the Arctic [...] are unacceptable," says Dr Sian Prior, Lead Advisor to the Clean Arctic Alliance, an advocacy group for the ban of HFO in the Arctic.

While it is difficult to predict if these recent announcements will start a trend for other companies to follow, she emphasized that MSC's decision "sends a clear message to the shipping industry" of the importance of environmentally responsible decision making, including choosing to not use Arctic sea routes.

Cleaner vessels for the Arctic

Also, the importance of catering to growing public demands for cleaner shipping and vessels is not limited to the container shipping sector. A number of cruise ship operators, including France’s Ponant and Norway’s Hurtigruten launched battery-assisted ships for their Arctic cruises. 

Even shipping companies transporting Russia’s oil and gas along the NSR are looking to cleaner fuels. This summer saw the first LNG-powered oil tanker – it used cleaner-burning liquefied natural gas as fuel – travel along the NSR. The vessel’s operator Russia’s Sovcomflot, has several more vessels of this type on order. 

As the number of shipping operators stepping away from the Arctic continues to grow companies may be forced to take a position. Lasserre concludes: “What is sure is that if several other shipping companies say they give up on Arctic shipping, then it will be increasingly difficult to remain silent on the issue.”

 

The article was amended to include a statement from shipping company Maersk that was received after initial publication. 

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