The South Korean government sees great potential for the country’s shipping industry in the Northeast Passage. A government funding scheme is now being launched for the construction and purchase of ships for the Arctic route between Asia and Europe.
The Northeast Passage along the northern Russian coast is regarded, in the context of global warming, as an important alternative for transport between the Far East and Europe. The traditional sea route through the Suez Canal is around 21,000 km long, depending on the specific port of call, whereas the route through the Northeast Passage is around a third shorter. However, the number of shipments is still relatively low. The infrastructure and ice conditions ‘hinder’ regular shipping services.
The Arctic is increasingly becoming a focus for shipping. For many years, the Northeast Passage has been regarded as a prestige project for Russian President Vladimir Putin, who hopes to generate transit revenue, develop remote regions and establish trade routes for raw materials. Meanwhile, China and other countries have also significantly stepped up their commitment to the Northeast Passage. South Korea is among them.
The state-controlled financing company Korea Ocean Business Corporation (KOBC) has now launched an annual investment programme worth the equivalent of around $86.9 million to finance the construction and acquisition of icebreakers and ice-class vessels for use on the ‘Northern Sea Route’.
Seoul is also funding second-hand vessels for the Northeast Passage
The programme covers both newbuilds and second-hand vessels, including container ships, bulk carriers, tankers and car carriers. According to several media reports, KOBC – founded in 2018 and also involved in the nationalisation of the crisis-hit container shipping line HMM – could finance up to 30 per cent of the investment costs. In combination with so-called ‘senior debt’, up to 90 per cent of the vessel’s price could even be covered.
The aim of the programme is to reduce the equity requirements for South Korean shipping companies considering investments in the more expensive icebreakers and ice-class vessels. A support programme for new, more environmentally friendly icebreakers and ice-class vessels, as well as a trial operation for container shipping through Arctic waters, had already been launched. The new initiative now also includes the purchase of second-hand tonnage.
Earlier this year, Seoul had already declared Arctic shipping a national policy priority. Part of the initiative was also a trial voyage by a container ship. This voyage has now been successfully completed. The 2,758 TEU freighter ‘PanStar Acro’ set sail from Busan on 22 August and arrived in Felixstowe on 12 September. Further voyages are planned. The frequency of these voyages is now to be gradually increased.
President Lee Jae Myung congratulated the ship on its maiden voyage along the Arctic route. “I congratulate and thank the captain and crew, who have pioneered this historic Arctic route,” Lee wrote on the social media platform X. “Let us wish the ‘PanStar Acro’ a safe return and a successful exploration of the Arctic route.”
