Challenges remain on Northern Sea Route despite tight supply for China exports

This month, Chinese-backed container carrier Sea Legend Shipping sent the first of seven scheduled container vessels across the Arctic Ocean with cargo for Europe. The company is taking advantage of the melting of sea ice during the summer months to move cargo using the Northern Sea Route (NSR). Figures from Nasa show a shrinkage of 12.2% per decade in that region because of warmer temperatures. 

Spot shipments on the NSR have been increasing in recent years, including for Russian oil, gas and minerals shipments. However, Sea Legend Shipping is the first container carrier to launch a regular seasonal cargo service.  The service will run up to November and the advantage for Asian shippers is a faster route to Europe.  

The route significantly cuts transit times between Asia and Europe by ocean compared with traditional routes via Africa’s Cape of Good Hope or through the Suez Canal. It also offers an alternative to disrupted shipping routes through the Middle East. However, challenges to shipping via the Arctic Ocean remain and the NSR is not likely to properly compete with those established Asia-Europe loops. 

Faster route 

Sea Legend Shipping carried out a trial shipment in September last year that took 20 days. The Istanbul Bridge carried almost 5,000 TEUs from Qingdao port in China, calling at Shanghai and Ningbo, before sailing through the Arctic Ocean and onto Felixstowe in the UK.  

It subsequently called at Rotterdam (Netherlands), Hamburg (Germany) and Gdansk (Poland).  

On August 15 this year, the Dubai Tower left Ningo with 1,740 TEUs, again destined for a first call at Felixstowe port. The cargo on board includes batteries and photovoltaic modules. It is the first vessel on the new regular service. According to maritime news and analyst source Lloyds List, Sea Legend Shipping has secured priority berthing at European ports to improve schedule reliability for time-sensitive shipments.  

The distance between the ports of Ningbo and Felixstowe is just more than 10,000 nautical miles (or 19,000 km).  

“Ningbo to Felixstowe in 20 days via the Arctic is roughly twice as fast as via Suez and about 30 days faster than the Cape of Good Hope, which has been the default route since the Houthis started attacking shipping in late 2023,” said Simon Heaney, senior manager of container research at maritime consultancy Drewry. “For cargo owners this can be very attractive in terms of inventory saving and shorter lead times.” 

Seasonal and speculative 

However, the NSR continues to present varied challenges to international shipping. Transit is limited to summer and early autumn and there is the risk of dangerous sailing conditions.  

Vessels also need high building and design specification, with Polar Code certification and/or with ice breaking capability.  

“There are far fewer of these types of ships available and those that do exist are much smaller than typical Asia to Europe mega-ships,” says Heaney. “That makes slot costs much higher and therefore require a significant freight rate premium.” 

Added to this, insurance costs are higher on the route which means, along with higher freight rates, it is really only a viable alternative for high-value cargoes, which can include automotive components. 

“Electric vehicle parts, batteries and other high-value goods have the strongest commercial logic to use NSR,” says Heaney. “It will allow suppliers to respond quicker to any increased demand in Europe for such products. It’s essentially a third supply option that sits between conventional Suez/Cape ocean freight (cheapest) and air freight (most expensive).”  

However, back-haul routes from Europe to Asia don’t balance volumes. Heaney said that potential European to China cargo could include high-value commodities, such as automotive components, chemicals and pharma, as well as premium consumer goods, but the returns are not equal in volume. 

“Drewry research shows that on average Europe to Asia containership voyages are barely one-third full, so NSR will likely face the same problems,” he said. Hence, headhaul NSR shippers will likely have to pay more to subsidise the round-voyage costs.” 

Another challenge to transit is the tight control Russia holds on the route, through the Northern Sea Route Administration and Rosatom, the Russian Federation’s state-owned atomic energy corporation. Vessels require permits and icebreaker support. It means owners and operators are subject to Russia’s decisions. “Sanctions compliance, insurance and finance could all be a problem,” said Heaney, “especially for Western ship owners; maybe less so for Asian entities.”  

Finished vehicles 

The NSR has never been a viable alternative for volume finished vehicle shipments and it is unlikely to compete any time soon. Despite the shrinkage of the ice, the very cold temperatures are a risk to high-value finished vehicles and even fewer ships in the ro-ro sector are ice-classed. 

However, the timing could not be more relevant for global operators of pure car and truck carriers to start using the route, according to Andrea De Luca, senior commercial analyst at Veson Nautical. 

“The car carrier segment is currently facing one of its tightest supply conditions in years, driven largely by the sheer scale of the boom in light vehicle exports from China, which has now overtaken every other country to become the world's largest light vehicle exporter,” he said.  

De Luca said that between January and July 2026, China exported 6.1 million units globally, up 68% year-on-year, with full-year volumes now tracking toward 10 million units, compared with just over 1 million light vehicles for the whole of 2019.  

“That's an extraordinary shift in barely six years, and it's reshaping the entire logistics picture around it,” he added. 

Europe, in particular, has emerged as the clear destination of choice for Chinese made light vehicles, according to De Luca. China Association of Automobile Manufacturers (Caam) figures show that over 1 million light vehicles shipped there in the first seven months of this year. He said this continued undersupply, driven by extraordinarily strong light vehicle demand from China and compounded by persistent tensions in the Middle East, which have forced operators on Asia to Europe voyages to abandon Suez in favour of the longer Cape of Good Hope route and add roughly 25% to the distance covered, has pushed spot freight rates for light vehicles from China to Europe up by 67% compared to January this year. 

Given that context, De Luca said there is real potential in the Northern Sea Route to effectively expand global fleet capacity without a single new vessel being built, simply by allowing existing tonnage to complete more voyages per year.  

“Given that China is reportedly having to find alternative shipping solutions for over 2 million vehicles that would, in a more balanced market, move via PCTCs, I think this is exactly the kind of pressure that could accelerate interest in the route,” he said. 

Shipping vehicles in containers is a growing trend, though constitutes a fraction of overall finished vehicle shipments and cannot compete on efficiency and cost for mass vehicle exports.  

Environmental risk 

However, additional traffic through Arctic Ocean risks disrupting a very sensitive ecosystem and any pollution would be all the more damaging. Heaney points out that there is not much infrastructure around to assist with rescue or pollution response should a vessel run into trouble. This sensitivity to potential damage to the Arctic environment is shared by the major vessel operators dominating the industry. A spokesperson for CMA CGM said that the company’s position, as expressed by its chairman Rodolphe Saadé back in 2019, had not changed.  

“I have decided that CMA CGM will not use the Northern Sea Route,” he said at the time, describing it as “a bold decision for the preservation of the Arctic, a global reservoir of biodiversity [and] a regulator of currents and climate.” 

That view is unlikely to change and environmental risk far outweighs any decarbonisation gains from transporting goods over shorter distances and burning less fuel, even if Sea Legend Shipping is committing LNG-powered vessels to the new service.   

“As such, and because of the challenges mentioned above, Drewry is of the view that NSR will only ever be a niche premium seasonal product that will cater to a very small (but valuable) part of the market,” he said. “It will not compete with traditional shipping services from Asia to Europe.”