South Korea’s Bet on Arctic Shipping Lanes

Sometime in late August, if all goes as planned, a Korean tanker will set sail from a South Korean port. Destination: Rotterdam. Nothing special about that port of call. What’s unusual is the route—above Russia, in waters once clogged with ice—which has largely melted. A vessel sailing via Russia can now make this 15,000-kilometer (9,300 miles) journey in 30 days, compared with the 40-day, 22,000-kilometer trip via the Indian Ocean and Suez Canal.

The Russians have plied these waters for years, and a few European commercial ships have tested the route. But the arrival of the Koreans, with their large merchant fleet and big ambitions, could change the game. So could China’s involvement: A cargo ship from state-owned China Ocean Shipping is headed for the northern route already.

Hyundai Glovis (086280:KS), the shipping arm of Hyundai Motor (005380:KS), plans to start a test service on the Russian route carrying oil. The pathway is open each year for about four months until October. The Hyundai ship must be escorted by a Russian ice breaker: The Russians charge $17.50 per ton of liquid cargo.

Within three to five years, the Arctic Ocean could be ice-free in the summer, according to a White House estimate. By 2050 ships may not need ice-breaking vessels in the month of September, says the UCLA study.

A third of the world’s undiscovered natural gas reserves and 13 percent of its undiscovered oil lie beneath the ice cap, says the U.S. Geological Survey. Russia is developing fields in the Arctic that could be the source of gas exports to Asian countries, and Korea wants to be involved in that trade.

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