For the first time since 2021, Russian coal is being shipped through the Northern Sea Route (NSR). The reason for this shift is the ongoing threat of Houthi attacks in the Red Sea. However, there are reasonable doubts regarding the permanence of coal shipping through the NSR.
On 10 July, the bulk carrier Admiral Schmidt set off from Ust-Luga in the Baltic Sea for the coast of China. This case is unique, as the ship’s cargo was coal and the chosen route lay through the NSR. Due to the increased danger of Houthi attacks in the Red Sea, particularly after this June’s attack on the Transworld Navigator, most vessels have opted for the route around Africa instead of the Suez Canal.
However, there are many questions about whether coal will remain a permanent item in the export structure of the NSR. Several factors argue against coal shipping through the Route.
Firstly, the cost of coal shipment is assessed quite high. The material itself is relatively cheap, and transportation is estimated to add at least 30% to the price; under low global prices, this ratio is said to reach as much as 85%.
Transportation of one tonne of coal is estimated at approximately $45-48.
Secondly, the NSR still cannot guarantee full regularity. The route is much safer than those through the Suez Canal and around Africa, but it may cause delays and requires icebreaker support, which further increases shipping costs.
Thirdly, the Eastern railway polygon is located closer to the coal production bases in Russia and appears more profitable. However, the railway is currently quite overloaded. The annual capacity of the railway routes is 180 million tonnes, while this year’s requests amounted to 353 million tonnes.
All things considered, this shipment of coal serves merely as a test run during a more favourable shipping summer season to assess the costs and determine whether it is worthwhile to include coal for the long term.
Russian experts suggest that the profitability of the operation will be determined by two factors: rising gas prices in the EU and increasing prices for coal in China, should they reach $150. If conditions are not favourable, Russian coal will likely be shipped to southern ports instead of the NSR.
Currently, the global price of coal is rising. During this month, the resource has seen an increase of 8.95%, reaching $145.20 (as of 26 August, ~13300 rubles), and has seemingly been testing the $150 mark (~13700 rubles) for a week, indicating that continued coal shipments are possible. Even so, it is most likely that shipping will remain seasonal and will primarily occur during the summer months when cargo vessels require less icebreaker guidance.
Earlier this year, the Arctic Century wrote that because of a confrontation in the Middle East a part of traffic between Europe and Asia could be diverted to the NSR. As we can see now, its traffic expands, but more for Russia’s export than in a global context.
The Editorial Board of the Arctic Century
Also read the publication:
Aiming for Safer Navigation on the NSR
