One on One with Dr. Rockford Weitz: How to capitalize on the melting arctic icecap

Global climate change is rapidly melting the Arctic icecap, enabling some ships to finally travel over continents, both through the legendary Northwest Passage over North America and a Northeast Passage over Eurasia. We interviewed Dr. Rockford Weitz, who leads the Arctic Futures Initiative, a consulting group advising businesses on how to capitalize on the effects of the melting Arctic icecap.

How viable is the Northwest Passage for shipping today?
RW: Today’s Northwest Passage is not that viable. The real action is actually going to be over the Northeast Passage or Northern Sea Route (see map). The Northwest Passage could also be interesting, but it’s full of islands. Ice predicting models suggest that the Northeast Passage is going to open first. If current trends continue, some scientists in the United States say that the entire Arctic Ocean could be ice-free during the summer by 2013.

If the ocean does become ice-free could shipping times be reduced?
RW: Say you’re sailing from the Nagoya Port in Japan, exporting automobiles to Rotterdam, the biggest port in Europe. Your current route heads south past Taiwan through the South China Sea, around Singapore into the Malacca Strait, across the Indian Ocean, through the Red Sea, then the Gulf of Aden, around Somalia, through the Suez Canal, across the Mediterranean, through the Strait of Gibraltar, north into the Atlantic and then to Rotterdam via the English Channel. You could save more than 40 percent of that journey if you sail straight across the Arctic. And, you’re not going through the Strait of Malacca or Somalia where piracy has been a problem.

How will this impact manufacturers?
RW: Think about it from a global supply chain perspective. If you have a long supply chain, you require your customers to carry more inventory in ships. Say it takes 30 days right now to go from Japan to Rotterdam, you cut that by 40 percent and reduce it 12 days. That’s 12 days of inventory that your customers don’t have to purchase in advance if they have a just-in-time supply chain.

An opening Arctic will also present a lot of new opportunities for manufacturers. Suppliers of components for ice-class vessels or oil rigs, such as heating coils and de-icing equipment could see a lot of growth opportunities as the melting icecap opens the way for increased Arctic commerce.

Which countries claim to have the rights to these routes, and which ones dominate?
RW: Russia, Canada, the United States, Denmark (via Greenland), and Norway are the main Arctic players. Russia has over half of the Arctic coast, so it certainly dominates from a geographic point of view. As far as resources, a U.S. Geological Survey report suggests that over 20 percent of the world’s “undiscovered oil reserves” lie north of the Arctic Circle. So far, the Russians have done more drilling than anybody else in the Arctic and they’ve found a lot of natural gas.

Some ships are already traveling through the Arctic passages today, correct?
RW: That’s right. A few have even completed Trans-Arctic transits—they’ve gone across the entire Arctic. There’s a lot of activity north of Russia and Norway in the Arctic, in the oil and gas industry. The world’s largest nickel mine is in northern Russia, and the nickel is exported via the Arctic on ice-class vessels. Red Dog Mine, the world’s largest zinc mine, is in Alaska and exports its ore by sea. Fishing is another area, and don’t forget tourism. People want to see the Arctic icecap before it melts.

Are you most interested in the new shipping paths or the natural resources?
RW: I think that both have the potential to dramatically change the level of commercial operations in the Arctic. The natural resources will likely be developed first, but you can’t completely separate them, because transportation of resources will most likely be maritime.