The Economist Individual Case Study.

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INDIVIDUAL CASE STUDY

20180823-CONTANER SHIP TO  BREAK THE ICE ON RUSSIAN ARCTIC ROUTE

Name: SAQUIB AMIN KHAN

Student ID: 300294753

Course Name: Global Supply Chain Management

Course and Section: BUSN 3410-003

Batch: Wednesday 12.30-3.20

Due: October 3, 2018

CASE OVERVIEW

Venta Maersk the Danish owned vessel becomes the first container ship to take the expedition from  Vladivostok to St Petersburg using the most appealing northern sea route via the Bering Strait. The importance of this route is its shorter distance from Russia to other Europeans countries. the reduction of ice in the artic due to climate change and the design of new ice-breaking commercial vessel make

Venta Maersk the Danish-owned vessel becomes the first container ship to take the expedition from  Vladivostok to St Petersburg using the most appealing northern sea route via the Bering Strait. The importance of this route is its shorter distance from Russia to other Europeans countries. the reduction of ice in the artic due to climate change and the design of new ice-breaking commercial vessel make this route of great significance. the trail voyage was aimed to collect the scientific data and to check the route commercial feasibility.

According to the question, Venta Maersk carried eighty percent (80%) of the containers when compared to the largest container ship currently sailing and almost using the similar labour cost but its 14 days faster when compared to southern sea route via Suez canal.

It will really make economic sense if the Northern Sea Route (NSR) is commercialized and passable all year round as it will save many thousand nautical miles and sailing times. It may bring economic benefits particularly for the nations which are connected with arctic ocean coastline - Canada, Norway, the united states Russia and Denmark. The shipping of fish from Russia to other arctic ocean coastline connected countries will become easier without a long delay  and waiting, but there is a concern by environmentalist that the exploration and development of arctic could spoil the planet's last great frontiers, a flawless habitat home to wildlife and native communities that are living there from thousands of years. Currently all the vessels are using the Panama canal as their transit, however the largest ship that can go through Panama canal is 195.1 m long,32.6m wide, and 12m crafted depth and with much more usage ships have to wait for long time and are required to pay a much higher transit fees to use Canal so by making northern sea route via Bering Strait accessible, the transit fee will be much much less compared  to Panama canal.

The addition of the northern sea route as an alternative route for container shipping for transporting cargoes between the extreme east and Europe seems highly appreciable and acceptable by shipping companies due to the great amount of saving in fuel consumption, operating cost, bunker cost, journey time and emission. This situation will have a great effect on the Malaysian economy as Malaysia is a leading maritime nation, ports and shipping are recognized as essential contributors to enabling Malaysian trade. Malaysia use Malacca Strait as their route passing through the Suez Canal so the opening of NSR will have a great effect in  Malacca Shipping activities. (Rahman, 2014)

The figure below shows the comparative data between two maritime routes for transporting cargoes from the Extreme East to Europe. The shortest route to travel from China to Rotterdam is by using the NSR which can save up to 14 days. The philosophy applied in the shipping industry is the reduction in distance of route will automatically reduce the travel time, eventually reducing the total fuel consumption, vessel operating cost and bunker cost respectively. Therefore, the amount of emissions produced by ships will be reduced. Finally, the shipping companies’ profit margin will dramatically increase without any argument. (Rahman, 2014)