container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCRcombined Shipping in the Age of Mega-ships

Transcription

1 IAME 2016 CONFERENCE HAMBURG Container Quick Delivery Scenario between East Masahiko Furuichi Graduate School of Management, Kyoto University Yoshida-Honmachi, Sakyo-ku, Kyoto, , Japan Natsuhiko Otsuka Arctic Research Center, Hokkaido University North-21, West-11, Kita-ku, Sapporo, , Japan Abstract Mega-ships, i.e. 18,000-20,000TEU containerships, first emerged in Since then, some 100 Mega-ships have been put on the order book and planned to be delivered by 2017 (OECD/ITF, 2015). When ever-enlarging containerships reached 20,000TEUs in capacity, they inevitably increased port calls in a rotation to collect more cargo demand than ever before. For example, Maersk Europe-Far East service AE2 served nineteen (19) ports in a rotation in This service was provided by a total of 12 containerships, based on a weekly service and 84day (12week)-rotation with an average capacity of 17,368TEUs per week. Accordingly, a transit time between East Asia and Northwest Europe has been extended to 42days (6weeks) while taking economies of scale advantage of the Mega-ships. Taking the competitive environment in the age of Mega-ships into account, the authors propose the container quick delivery scenario between East shipping using a total of seven (7) 4,000TEU ice-class containerships, based on a weekly service, a 49day-rotation and six (6) ports of call for Yokohama, Busan, Shanghai, Hamburg, Rotterdam and Felixstowe. This service focuses on a niche market of high-value and/or time-sensitive cargo by reducing the transit time up to 24.5days (3.5weeks), which prefers the shorter transit time at a reasonable shipping cost. The containerships are able to practically maintain the scheduled navigation with a rotation time of 49days in the summertime (the NSR operation), as far as they sail at an average speed of at least 9Kn in the icy water section. Furthermore, even if the containerships are stuck in the icy water section for hours, they are also able to practically recover the scheduled navigation of a rotation

2 time of 49days, by sailing at an average speed of 10-11Kn in the icy water section and a nominal speed of 25Kn in the ordinary section. This fact implies that the container quick delivery scenario by the NSR/SCR-combined shipping can be realized in the practical manner, as far as the sufficient amount of high-value and/or time-sensitive cargo exists. Keywords: NSR, Quick Delivery, Container, Liner Shipping, Mega-ships 1. Introduction The Northern Sea Route (NSR) shipping has recently gained a momentum for maritime trade between East Asia and Northwest Europe, taking the direct effect of reduced sailing distance of approximately 40% compared to the Suez Canal Route (SCR) into account, as the Arctic sea-ice retreats due to the global warming. The commercial transit shipping via the NSR had increased and reached a maximum of 71voyages and 1,356thousand tons in 2013, of which cargo were mainly natural resources, e.g. gas condensate, jet fuel, coal, LNG and iron ore (Table 1). Pilot commercial transit shipping via the NSR was achieved by a non-russian flag cargo ship between East Asia and Northwest Europe in Similarly, pilot commercial transit shipping via the NSR was also achieved by the 1,118TEU ice-class containership Yong Sheng of COSCO in 2013 and 2015, which proved practical navigability of the containerships via the NSR. Table 1 Recent NSR commercial transit shipping in NSR transit voyages NSR transit cargo ( 000 tons) ,262 1, Total NSR cargo ( 000 tons) 3,111 3,876 3,914 3,982 4,857 4,896 Source: Rosatomflot, Arctic Shipping Seminar Korea, The NSR/SCR-combined shipping, when a ship transits the NSR during the summertime and the SCR in the wintertime, had been proposed as a simple container transport scenario between East Asia and Northwest Europe in the previous studies (FURUICHI, M. and OTSUKA, N., 2013, 2015). In the simple container transport scenario, a port-to-port-calling service without any intermediate port calls between Yokohama and Hamburg is assumed for the NSR operation in the summertime, while a multi-port-calling service between five ports in East Asia and another five ports in Northwest Europe is assumed for the SCR operation in the wintertime. Furthermore, the NSR navigation cannot avoid uncertainty at sea, e.g. rough weather, sea ice, low visibility, polar night and icing in the icy waters. Consequently, the simple container transport scenario does not satisfy a set of liner shipping principles, i.e. the IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 2

3 same transit time, the same service day of the week and the same port calls in a rotation on a year-round basis. Taking a set of liner shipping principles into account, the authors propose a container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships, based on the same transit time, the same service day of the week and the same port calls in a rotation on a year-round basis. This service focuses on a niche market of high-value and/or time-sensitive cargo by reducing the transit time compared to the SCR shipping at a reasonable cost. The authors also examine a trade-off relationship between the shorter transit times of the container quick delivery scenario by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships and the lower shipping unit costs by the SCR shipping using the 4,000-20,000TEU containerships. 2. Literature review Commercial viability of container transport by the NSR shipping has been analyzed by many previous studies (e.g., ISAKOV, N. A., et al., 1999, VERNY, J. and GRIGENTIN, C., 2009, CHERNOVA, S. and VOLKOV, A., 2010, LIU, M. and KRONBAK, J., 2010, SCHOYEN, H. and BRATHEN, S., 2011, XU, H., et al., 2011, OMRE A., 2012, FURUICHI, M. and OTSUKA, N., 2013, 2015, LASSERRE, F., 2014). At the same time, liner container shipping industry has long struggled to maintain a reliable containership routing and scheduling, i) containership fleet size and mix, alliance strategy, and network design (at the strategic level), ii) frequency determination, fleet deployment, speed optimization, and schedule design (at the tactical level), and iii) container booking and routing, and ship re-scheduling (at the operational level) (BROUER, B. D., et al., 2013, MENG, Q., et al., 2014). The uncertainty factors both at sea and at ports were also analyzed by the previous studies, so as to satisfy a set of liner container shipping principles i.e. the same transit time, the same service day of the week and the same port calls in a rotation on a yearround basis (TRAN, N. K., 2011, WANG, S. and MENG, Q., 2012). However, some previous studies focused on creating potential scenarios (service schedules) of container liner shipping between Asia and Europe, which are only available during the NSR service period of the year (VERNY, J. and GRIGENTIN, C., 2009, CHERNOVA, S. and VOLKOV, A., 2010, XU, H., et al., 2011, LASSERRE, F., 2014). Some others focused on the NSR/SCR-combined shipping, when a ship transits the NSR in the summertime and the SCR in the wintertime, of which port calls and rotation times are different between the NSR operation and the SCR operation (LIU, M. and KRONBAK, J., 2010, SCHOYEN, H. and IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 3

4 BRATHEN, S., 2011, OMRE A., 2012, FURUICHI, M. and OTSUKA, N., 2013, 2015). All those scenarios (service schedules) mentioned above do not satisfy a set of liner shipping principles. Consequently, more practically viable container transport scenarios (service schedules) between East Asia and Northwest Europe by the NSR/SCR-combined shipping should be elaborated and proposed, which satisfy a set of liner shipping principles, so as to fill the gap between the previous studies and the future research direction. 3. Extended rotation time between East Asia and Northwest Europe by enlarging containerships Economies of scale advantage of the Mega-ships can be achieved, only if their capacity is fully utilized. For example, the shipping cost per TEU by the fully loaded 18,000TEU containerships is estimated 9% lower than that by the fully loaded 14,000TEU containerships. However, the shipping cost per TEU by the 18,000TEU containerships of 78% capacity utilization, of which loaded containers are equivalent to the capacity of 14,000TEU containerships, is estimated 15% higher than that by the fully loaded 14,000TEU containerships (MALCHOW, U., 2015). The Mega-ships were expected to visit only a small number of selected hub-ports in high demand; on the other hand, the containerships in fact increased their port calls in a rotation to collect more cargo demand at each port than ever before, as they have been enlarging in capacity (Table 2). Accordingly, a rotation time of the East Asia-Northwest Europe loop service has been extended significantly and the number of containerships deployed in a fleet also increased, while taking economies of scale advantage of the enlarging containerships. For example, Maersk Europe-Far East service AE2 served nineteen (19) ports in a rotation by the Megaships in This service was provided by a total of 12 containers, based on a weekly frequency and a 4day (12week)-rotation with an average capacity of 17,368TEUs per week. This is a reality which has been observed, as the containerships have been enlarged in the last decade. Significantly extended transit time from an origin port to a destination port should be regarded as economy of scale dis-advantages of the Mega-ships. Transit time between East Asia and Northwest Europe has been extended to 42days (6weeks) from 28days (4weeks), of which service level had deteriorated especially for high-value and/or time-sensitive cargo, while taking economy of scale advantages of the Mega-ships. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 4

5 Table 2 Typical East Asia-Northwest Europe Loop Services Loop Service (Shipping Lines) Average Capacity (TEU) Europe Mediterranean / Mid. East Asia Port calls Rotation time (days) Transit time (days) Ships in a fleet CEX in 2003 (COSCO/K-Line/Yang Ming) 5,370 Le Havre Hamburg Rotterdam Singapore Yantian Hong Kong Tokyo Shimizu Nagoya Kobe JEX in 2008 (APL/Hyundai/MOL) 6,367 Le Havre Southampton Hamburg Rotterdam Singapore Yantian Hong Kong Tokyo Nagoya Kobe Silk Express Service in 2003 (MSC) 6,741 Felixstowe Bremerhaven Hamburg Antwerp Le Havre Valencia Jebel Ali Singapore Hong Kong Chiwan Qingdao Xingang Busan NE6 in 2015 (COSCO/Evergreen/Ha njin/k-line/yang Ming) 12,540 Le Havre Rotterdam Hamburg Algeciras Jeddah Singapore Yantian Shanghai Qingdao Kwangyang Busan AE2 in 2015 (Maersk) 17,368 Wilhemshaven Aarhus Gothenburg Bremerhaven Antwerp Southsampton Tanger Tanjung Pelepas Singapore Yantian Xingang Qingdao Shanghai Ningbo Busan Source: International Transportation Handbook 2004, 2009, 2016 (Ocean Commerce) 4. Simple container transport scenario by the NSR/SCR-combined shipping The simple container transport scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping was proposed and the empirical analysis was achieved in the previous studies by the authors (FURUICHI, M. and OTSUKA, N., 2013, 2015). Maritime shipping cost components and their practical levels used in the studies are briefly summarized in Table 3. The most essential components of the simple container transport scenario are explained in detail in the following sub-section. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 5

6 Table 3 Maritime shipping cost components and their practical levels Cost component 1. Capital cost 2. NSR fee 3. Ice pilot fee 4. SCR fee 5. Crew cost 6. Maintenance cost 7. Insurance cost Description Capital cost is introduced as a yearly repayment (i.e. equivalent to a repayment of 10.9% of the capital cost for 15 years) of the new ship based on an interest rate of 7% and a return period of 15 years, from the project finance viewpoint (SHIP & OCEAN FOUNDATION, 2000). NSR fee is assumed to be 5.0 (USD/GT) which is the latest report of NSR fee transaction (FALCK, 2012). Ice pilot fee is assumed 673 (USD/day) for the NSR navigation between Kara and Bering straits, as stipulated by the Russian regulation. Suez Canal fees are taken from the website of the Suez Canal Authority as of December Crew cost is assumed 1.0 million (USD/ship/year), as reported (JAPAN SHIP-OWNERS ASSOCIATION, 2012). An annual maintenance cost is proportionally assumed (%/year) of the ship building cost, as reported (HINO, M., 2011). Annual insurance premium of both H&M and P&I insurance in total is proportionally assumed (%/year) of the ship building cost, as reported (HINO, M., 2011). Annual insurance premium of 10 (USD/GT/year) in total is assumed as additional H&M and P&I insurance premium for the NSR shipping, as reported by (SHIP & OCEAN FOUNDATION, 2000). Apart from the ordinary insurance cost, Aden Emergency Charge (40USD/TEU) is similarly assumed for the SCR shipping as a kind of insurance premium for piracy off Somalia, as stipulated (MOL, 2012). 8. Fuel cost Fuel unit cost is assumed between 300 and 900 (USD/ton), taking the recent transactions in Singapore into account. The assumption that fuel consumption per distance unit is proportional to the square of sailing speed is recommended to be applied in the calculation, when operational sailing speed is slower in the ice waters for the NSR shipping. 9. Port dues Port dues are assumed to be (USD/GT/call) in total for each port entry, including port entry due, berthing due and line-handling charge. Additionally, container handling charge of 100 (USD/TEU) is assumed for loading and unloading respectively at both end ports (JICA, 2013). IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 6

7 4.1. Simple container transport scenario by the NSR/SCR-combined shipping Ship size The 4,000TEU ice-class containerships are selected for the simple container transport scenario, of which economies of scale advantage can be generated to a certain extent, satisfying the water depth restriction of 13.0m at the Sannikov Strait on the NSR (Figure 1). NSR Hamburg Yokohama Hamburg Kara Gate Strait Bering Strait Sannikov Strait Yokohama SCR Ordinary Water Section 2,112N.M. (28.7%) Icy Water Section 2,551N.M. (34.7%) Ordinary Water Section 2,693N.M. (36.6%) NSR Distance(Yokohama-Hamburg): 7,356N.M. Figure 1 NSR and SCR shipping routes in the simple container transport scenario Year-round operation The simple container transport scenario combines the NSR operation in the summertime and the SCR operation in the wintertime on a year-round basis (Figure 1) Port calls in a rotation A port-to-port-calling service is assumed between Yokohama and Hamburg in a rotation for the NSR operation in the summertime, which requires additional feeder services to/from the other ports in both East Asia and Northwest Europe; on the other hand, a multi-port-calling service is assumed between five (5) ports in East Asia and another five (5) ports in Northwest Europe in a rotation for the SCR operation in the wintertime to capture abundant demand in both regions. This means that the simple container transport scenario does not satisfy the liner shipping principle, i.e. the same ports of call in a rotation on a year-round basis Sailing speed via the NSR Since the sailing speed in the icy waters is relatively slow compared to that in the ordinary waters, the operational sailing speed is assumed at a range of 12.8 to 14.1Kn in the icy water section of the NSR as indicated in Figure 1 and Table 4. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 7

8 Table 4 Sailing speeds in the icy water section and the ordinary water NSR Service period Actual sailing speed ( ) Assumed sailing speed section of the NSR during the NSR service period May June July Aug. Sep. Oct. Nov. Dec. Icy water section Icy water section Icy water section Kn 10.0Kn 10.8Kn 10.7Kn 11.2Kn 11.0Kn Kn 14.1Kn 12.8Kn Ordinary water section 20.0Kn 105days days days days days The assumed sailing speed seems slightly faster than the actual sailing speed based on the navigation records in , taking account of the estimation results of the operational sailing speed of the ice-strengthened ships escorted by the icebreakers (NAKANO, Y., et al., 2014, OTSUKA, N., et al., 2015, 2016) as well as the interview with Rosatomflot in 2015 on the operational sailing speed of the icebreakers in the icy waters, which remains within a range of 12 to 14Kn. The NSR service period is also set at a range of 105 to 225days, taking the recent navigation records of the NSR commercial shipping into account Ships deployed in a fleet An average rotation time is estimated at 38.6days for the NSR operation in the summertime, assuming the sailing speed of Kn in the icy water section and 20Kn in the ordinary water section, which requires at least six (6) containerships to provide a weekly service; on the other hand, a rotation time is estimated at 60.8days for the SCR operation in the wintertime, assuming the sailing speed of 20Kn in the ordinary waters, which requires at least nine (9) containerships to provide a weekly service. Consequently, nine (9) ice-class containerships are required to securely provide a weekly service on a year-round basis, which results in overcapacity by three (3) ice-class containerships in the summertime. This also means that the transit times of 19.3days and 30.4days differ from the summertime (the NSR operation) to the wintertime (the SCR operation), which do not satisfy the liner shipping principle, i.e. the same transit time on a year-round basis. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 8

9 4.2. Empirical analysis of the simple container transport scenario by the NSR/SCRcombined shipping Shipping unit cost in the simple container transport scenario by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships Shipping unit cost between Yokohama and Hamburg by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships is computed at 1,211USD/TEU, assuming that the NSR service period is 105days and the bunker oil price is 650USD/ton. As the NSR service period gets longer up to 225days, the shipping unit cost is decreased and computed at 984USD/TEU (Figure 2) Shipping unit cost in the SCR container transport scenario using the 4,000-20,000TEU containerships On the other hand, the shipping unit costs between Yokohama and Hamburg by the SCR shipping using the 4,000-20,000TEU containerships are similarly computed at 1,355USD/TEU, 1,320USD/TEU, 1,211USD/TEU, 1,035USD/TEU, 944USD/TEU and 760USD/TEU for the ship sizes of 4,000TEU, 6,000TEU, 8,000TEU, 11,000TEU, 15,000TEU and 20,000TEU respectively (Figure 2). Shipping Unit Cost (USD/TEU) 1,600 1,400 1,200 1, ,355 1,320 1,211 1,186 1,211 1,090 1,074 1, NSR/SCR-combined Shipping SCR Shipping Port calls per NSR voyage/port calls per SCR voyage USD/TEU Port calls/nsr voyage Port calls/scr voyage Transit Time (days) Figure 2 Shipping unit cost, port calls and transit time in the simple container transport scenario IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 9

10 Comparison between the NSR/SCR-combined shipping and the SCR shipping This implies that the simple container transport scenario by the NSR/SCR-combined shipping (1,211USD/TEU) using the 4,000TEU ice-class containership is competitive enough against the SCR shipping (1,211-1,355USD/TEU) using the containerships of 4,000-8,000TEU. As the NSR service period gets longer from 105days to 225days, the simple container transport scenario by the NSR/SCR-combined shipping (984USD/TEU) using the 4,000TEU ice-class containerships appears nearly competitive against the SCR shipping (944-1,035USD/TEU) using the 11,000-15,000TEU containerships. This also implies that the simple container transport scenario by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships can be regarded as economically feasible as the SCR shipping using the 11,000-15,000TEU containerships, taking the extending trend of the NSR service period into account. However, the SCR shipping (760USD/TEU) using the 20,000TEU containerships is far more competitive against the simple container transport scenario by the NSR/SCR-combined shipping (984-1,211USD/TEU) using the 4,000TEU ice-class containerships, while the actual SCR transit time of 42days by the 20,000TEU containerships is much longer than the SCR transit time of 30.4days assumed in the simple scenario. (Figure 2). 5. Container quick delivery scenario by the NSR/SCR-combined shipping Taking a set of liner shipping principles into account, the authors propose a container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships, based on the same transit time, the same service day of the week and the same port calls in a rotation on a year-round basis. The rotation time of the container quick delivery scenario becomes a little bit longer than that of the simple container transport scenario, because the container quick delivery scenario needs to secure the same rotation time for both the NSR operation in the summertime and the SCR operation in the wintertime on a year-round basis. However, this scenario aims at providing a quick delivery service at a reasonable cost compared to the SCR shipping by the 20,0000TEU containerships Container quick delivery scenario by the NSR/SCR-combined shipping Ship size The 4,000TEU ice-class containerships are similarly selected for the container quick delivery scenario as well as the simple container transport scenario. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 10

11 Year-round operation The container quick delivery scenario combines the NSR operation in the summertime and the SCR operation in the wintertime on a year-round basis (Figure 3) Ports of call in a rotation First of all, the authors assume appropriate operational conditions of the container quick delivery scenario, which satisfy a liner shipping principle, i.e. the same ports of call in a rotation on a year-round basis. In order to realize the year-round multi-port-calling service between East Asia and Northwest Europe, three (3) ports of call are assumed at both sides, i.e. Yokohama, Busan and Shanghai in East Asia and Hamburg, Rotterdam and Felixstowe in Northwest Europe (Figure 3). NSR Hamburg Rotterdam Felixstowe Yokohama Shanghai Busan SCR Hamburg Rotterdam Felixstowe Ordinary Water Section 2,112N.M. (28.7%) Kara Gate Strait Bering Strait Sannikov Strait Icy Water Section 2,551N.M. (34.7%) Yokohama Shanghai Busan Ordinary Water Section 2,693N.M. (36.6%) NSR Distance(Yokohama-Hamburg): 7,356N.M. Figure 3 Ports of call and icy water section of the NSR in the container quick delivery scenario by the NSR/SCR-combined shipping Sailing speed via the NSR, a rotation time and ships deployed in a fleet Secondly, the authors examine if a rotation time of the SCR operation in the wintertime for the container quick delivery scenario can be assumed at 42days (6weeks) which is equivalent to that of the NSR operation in the simple container transport scenario, by deploying six (6) containerships in a fleet. However, the sailing speed is estimated at 26.4Kn for the SCR operation in the wintertime, which exceeds the nominal speed (25Kn) of the 4,000TEU iceclass containerships. Accordingly, the authors conclude that the practical container quick delivery scenario can be realized by deploying seven (7) 4,000TEU ice-class containerships in a fleet at a rotation time of 49days (7weeks) and the port dwelling time of 18hours at each IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 11

12 port, resulting in the sailing speed of 22.3Kn for the SCR operation in the wintertime (Table 5). Thirdly, the authors examine if the same ports of call in a rotation at the same rotation time of 49days can be realized for the NSR operation in the summertime. The average sailing speed of 18.2Kn in the ordinary water section is obtained for the NSR operation, which results in the same ports of call in a rotation and the same rotation time of 49days, if the average sailing speed in the icy water section is assumed at 12.8Kn (Table 5). This rotation time of 49days for the container quick delivery scenario secures the same rotation time of the NSR operation as well as the SCR operation, but longer by 7days (1week) than that of the simple container transport scenario. Table 5 Ports of call and a rotation time for the container quick delivery scenario by the NSR/SCR-combined shipping Loop Service NRS service preiod Aarhus Gothenburg Hamburg Europe Med. Asia Rotterdam Antwerp Felixtowe Le Havre Algeciras Port Said Tanjung Pelepas 105 days 135 days 5, , , , , days 6 NSR+SCR 12, (4,000TEU) 5, days 6 12, days 5, , Rest of NSR service period 6 23, Remark ) Dwelling time at each port is assumed at 0.75day (18hours). Singapore Shekou Hong Kong Ningbo Shanghai Busan Kobe Yokohama Ports of Call Loop Distance (N.M.) Average Sailing Speed (Kn) Rotatioin Time (days) Ships in a Fleet 5.2. Practical SCR shipping scenario The authors assume that the practical SCR shipping scenario, taking the typical East Asia- Northwest Europe loop services into account, i.e., the average sailing speed within kn, a rotation time of 56-84days (8-12weeks), a fleet of 8-12ships, 10-18ports of call, and the port dwelling time of 18-42hours, for the containerships of 4,000-20,000TEUs (Table 6). As a result, the larger containerships require longer rotation times between East Asia and Northwest Europe; 56, 63, 70, 77 and 84days (8-12weeks), compared to 49days (7weeks) of the container quick delivery scenario by the NSR/SCR-combined shipping. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 12

13 Table 6 Ports of call and a rotation time for the SCR shipping Loop Service Ship-size Europe Med. Asia Aarhus Gothenburg Hamburg Rotterdam Antwerp Felixtowe Le Havre Algeciras Port Said Tanjung Pelepas Singapore Shekou Hong Kong Ningbo Shanghai Busan Kobe Yokohama Ports of Call Loop Distance (N.M.) Average Sailing Speed (Kn) Rotatioin Time (days) Ships in a Fleet SCR 4,000TEU 10 24, SCR SCR SCR SCR SCR 6,000TEU 8,000TEU 11,000TEU 15,000TEU 20,000TEU , , , , , Remark ) Dwelling time at each port is assumed 0.75day (18hours) for 4,000TEUs and 1.0day (24hours) 1.75day (42hours) for 6,000-20,000TEUs Feasibility of the container quick delivery scenario by the NSR/SCR-combined shipping Shipping unit cost by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships Shipping unit cost between Yokohama and Hamburg by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships is computed at 1,233USD/TEU, assuming that the NSR service period is 105days and the bunker oil price is 650USD/ton. As the NSR service period gets longer up to 225days, the shipping unit cost gets lower and is computed at 1,091USD/TEU. On the other hand, the shipping unit cost by the NSR/SCR-combined shipping using the 4,000TEU ice-class containerships is estimated slightly higher than those for the simple container transport scenario, because the sailing speed is assumed at 22.25Kn for the SCR operation in the container quick delivery scenario, higher than that (20Kn) for the SCR operation in the simple container transport scenario, so as to maintain the transit time of 24.5days (equivalent to the rotation time of 49days) on a year-round basis (Figure 4) Shipping unit cost by the SCR shipping using the 4,000-20,000TEU containerships Shipping unit cost between Yokohama and Hamburg by the SCR shipping using the 4,000-20,000TEU containerships is similarly computed at 1,257USD/TEU, 1,243USD/TEU, 1,167USD/TEU, 1,056USD/TEU, 1,003USD/TEU and 836USD/TEU for the containerships of 4,000TEU, 6,000TEU, 8,000TEU, 11,000TEU, 15,000TEU and 20,000TEU respectively (Figure 4). IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 13

14 Comparison between the NSR/SCR-combined shipping and the SCR shipping This implies that the container quick delivery scenario by the NSR/SCR-combined shipping (1,233USD/TEU) using the 4,000TEU ice-class containerships can be regarded as economically feasible as the SCR shipping (1,243-1,257USD/TEU) using the containerships of 4,000-6,000TEU, assuming that the NSR service period is105days. Shipping unit cost by the container quick delivery scenario using the 4,000TEU ice-class containership is computed at 1,091USD/TEU assuming that the NSR service period extends to 225days, which is almost equivalent to the shipping unit cost (1,167USD/TEU) by the SCR shipping using the containership of 8,000TEU. However, the SCR shipping (836-1,003USD/TEU) using the containerships of 15,000-20,000TEU are much more competitive against the container quick delivery scenario (1,091-1,233USD/TEU) using the 4,000TEU ice-class containerships, whereas a transit time ( days) by the SCR shipping is longer than that (24.5days) of the container quick delivery scenario by days (2-2.5weeks) (Figure 4). This longer transit time by the SCR shipping using the 20,000TEU containerships should be regarded as disadvantages compared to the container quick delivery scenario. Shipping Unit Cost (USD/TEU) 1,600 1,400 1,200 1, ,233 1, ,204 1,243 1,176 1, ,119 1,091 1,056 1, NSR/SCR-combined Shipping SCR Shipping Port calls per voyage / Transit Time (days) USD/TEU Port calls/voyage Transit Time (days) Figure 4 Shipping unit cost, ports of call and transit time in the container quick delivery scenario IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 14

15 6. Potential demand of high-value and/or time-sensitive cargo 6.1. Potential demand for the container quick delivery scenario by the NSR/SCRcombined shipping Container cargo flows between East Asia and Northwest Europe in 2014 According to the Container Trade Statistics (CTS), the annual container cargo flows between Asia and Europe is reported as 22.35million TEUs in total, i.e million TEUs for the westbound and 6.95TEUs for the eastbound in More precisely, the potential annual demand should be focused on the container flows between East Asia, i.e. Japan, Korea and Bohai Rim of China (Dalian, Tianjin, Qingdao, etc.) and Northwest Europe, i.e. the U.K., France, the Netherlands and Germany, which may take direct advantage of the container quick delivery scenario by the NSR/SCR-combined shipping. The annual container cargo flow between East Asia and Northwest Europe is estimated at 2.26million TEUs in total by the authors, of which westbound flow is 1.557million TEUs (= 15.40*24.3%*41.6%) and eastbound flow is 0.703million TEUs (= 6.95*24.3%*41.6%) in 2014, based on UENO, E, 2015 (Table 7). Table 7 Westbound container cargo flow between Asia and Europe in 2014 China Other Origin Thailand Vietnam Bohai Korea Japan Total ASEAN Others Rim 000 TEU ,801 8,662 2,035 1, , % 7.4% 3.6% (%) 3.6% 4.2% 11.7% 56.2% 100% 24.3% Destination U.K. France NL Germany Other Europe Total 000 TEU ,400 (%) 12.8% 6.2% 10.0% 12.6% 41.6% 58.4% 100% Source: Estimation by the authors based on UENO, E, Expected utilization ratio of the capacity According to the above-mentioned estimated annual container cargo flows, the westbound flow of 1.557million TEUs exceeds the eastbound flow of 0.703million TEUs to a large extent, which may result in imbalance of container cargo flows. Therefore, the authors assume that the expected utilization ratio of the capacity is estimated at a maximum of 70% for the proposed annual capacity of the container quick delivery scenario, taking this imbalance condition (72.6%= ( )/( )) into account. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 15

16 6.2. Target demand for the container quick delivery scenario by the NSR/SCRcombined shipping Proposed annual capacity of the container quick delivery scenario As proposed in the section 5, the container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping using a total of seven (7) 4,000TEU ice-class containerships, serves three (3) ports at both sides, based on a weekly service and a 49day (7week)-rotation at an average capacity of 4,000TEUs per week. Accordingly, the annual capacity of the container quick delivery scenario is estimated at 416,000TEUs (= 4,000*52*2) for the eastbound and the westbound in total Expected annual capacity of the container quick delivery scenario Taking the imbalance condition of the potential demand into account, the practical annual capacity of the container quick delivery scenario is estimated at a maximum of 291,200TEUs (=416,000*70%), which accounts for 12.9% of the potential demand (2.26million TEUs) in Target demand for the container quick delivery scenario by the NSR/SCR-combined shipping The container quick delivery scenario may attract some percentage of the potential demand (2.26million TEUs/year), by the shorter transit time of 24.5day at a reasonable shipping unit cost of 1,091-1,233USD/TEU. However, further studies would be encouraged to examine how much of the high-value and/or time-sensitive cargo would be attracted by the container quick delivery scenario, compared to the practical SCR shipping scenario using the 20,000TEU containerships with the longer transit time of 42days at the lower shipping unit cost of 836USD/TEU in the age of the Mega-ships. 7. Scheduled navigation under uncertainty in the icy waters The container quick delivery scenario by the NSR/SCR-combined shipping cannot avoid uncertainty in the navigation especially via the NSR in the summertime, due to rough weather, sea ice, low visibility, polar night and icing in the icy water section of the NSR. Therefore, the authors examine if the scheduled navigation with a rotation time of 49days can be maintained so as to satisfy a set of liner shipping principles, i.e. the same transit time, the same service day of the week and the same port calls in a rotation on a year-round basis How to maintain the scheduled navigation of the container quick delivery scenario As indicated in Figure 3, the icy water section of 2,551N.M. via the NSR accounts for only 35% of the NSR navigation distance (7,356N.M.) between Yokohama and Hamburg, which IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 16

17 means that the rest of the NSR is the ordinary water section where the ice-class containerships can sail at a nominal speed of 25Kn. Accordingly, if the containerships are stuck in the icy water section of the NSR for a while, they may be able to maintain the scheduled navigation of a rotation time of 49days by speeding up to a nominal speed of 25Kn in the ordinary water section of the NSR (4,805N.M.) Minimum average sailing speed in the icy water section of the NSR to maintain the scheduled navigation Assuming that an average sailing speed is 12.8Kn in the icy water section of the NSR, equivalent to the lowest assumed speed ( Kn), the 4,000TEU ice-class containerships are able to maintain the scheduled navigation of a rotation time of 49days by sailing at an average speed of 18.2Kn in the ordinary water section. The authors further explore how slow the containerships can sail in the icy water section of the NSR, keeping a rotation time of 49days, if they sail at a nominal speed of 25Kn in the ordinary water section. The author conclude that as far as the containerships sail at an average speed of 9Kn in the icy water section, which is 3-5Kn slower than the assumed speed ( Kn) in the icy water section, they are able to maintain the scheduled navigation of a rotation time of 49days by sailing at an average speed of 24.3Kn in the ordinary water section (Figure 5). Average sailing speed in the ordinary water section (Kn) Average sailing speed in the icy water section (Kn) Figure 5 Minimum average sailing speed in the icy water section of the NSR to maintain the scheduled navigation IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 17

18 Maximum stuck hours in the icy water section of the NSR to maintain the scheduled navigation The authors again further explore how long the containerships can be stuck in the icy water section of the NSR, as far as they sail at a nominal speed of 25Kn in the ordinary water section and at an average speed of 9-13Kn in the icy water section, so to maintain the scheduled navigation of a rotation time of 49days. If the containerships sail at an average speed of 9, 10, 11, 12 and 13Kn in the icy water section, except stuck in the icy water section, and sail at a nominal speed of 25Kn in the ordinary water section, they are able to maintain the scheduled navigation of a rotation time of 49days for the stuck times of 20, 72, 120, 150 and 180hours respectively (Figure 6). Average sailing speed in the ordinary water section (Kn) Figure 6 Maximum stuck hours in the icy water section of the NSR to maintain the scheduled navigation 7.2. Average sailing speed in the icy water section of the NSR based on the most recent navigation records in Monthly average sailing speed in the icy water section of the NSR is calculated by the authors, based on the actual transit navigation records retrieved from the Russia s Northern Sea Route Administration (for 2011, 2012 and 2013) and the satellite AIS records (for 2014 and 2015). Four-month average sailing speed is calculated at 9.7Kn between August and November based on the five-year navigation records (Table 8). This is slower than the assumed sailing speed ( Kn) in the icy water section (Table 4). However, it should be noted that most of the transit records were achieved by the tankers and bulk carriers of which nominal sailing speed (15-18Kn) is slower than that (25Kn) of the containerships Average sailing speed in the icy water section: 9 (Kn) Average sailing speed in the icy water section: 10 (Kn) Average sailing speed in the icy water section: 11 (Kn) Average sailing speed in the icy water section: 12 (Kn) Average sailing speed in the icy water section: 13 (Kn) Stuck hours in the icy water section (hours) IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 18

19 Table 8 Monthly average sailing speed in the icy water section of the NSR in Month June July Aug. Sep. Oct. Nov. Average sailing speed (Kn) Number of transits Average sailing speed (August-November) (Kn) 9.7 Source: Records in ; retrieved from the Northern Sea Route Administration, Records in ; retrieved form the satellite AIS (Ship Finder), both by the authors. Out of 181 transit navigation records, two stuck incidents in the icy water section of the NSR are reported in the early July of In these incidents, two ice-class tankers were blocked by the heavy ice field and needed approximately five (5) days (120 hours) to sail out there at an average speed of one (1) Kn (OTSUKA, N, et al., 2015). This kind of sea ice condition rarely occurs only in June and early July in the specific water sections of the NSR. However, the containerships are able to practically maintain the scheduled navigation of a rotation time of 49days in the summertime (August-November), as far as they sail at an average speed of at least 9Kn in the icy water section (Figure 5). Furthermore, even if the containerships are stuck in the icy water section for hours, they are also able to practically recover the scheduled navigation of a rotation time of 49days, by sailing at an average speed of 10-11Kn in the icy water section and a nominal speed of 25Kn in the ordinary water section. This fact implies that the container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping proposed in this paper can be realized in the practical manner, satisfying a set of liner shipping principles, i.e. the same transit time, the same service day of the week and the same port calls in a rotation on a yearround basis. It should be noted that if the containerships are stuck in the icy water section of the NSR for 120hours in June and early July, they are presumably able to recover the scheduled navigation. 8. Conclusions The authors proposed the container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping using a total of seven (7) 4,000TEU ice-class containerships, based on a weekly service, a 49day-rotation and six (6) ports of call for Yokohama, Busan, Shanghai, Hamburg, Rotterdam and Felixstowe. This service focuses on a niche market of high-value and/or time-sensitive cargo by reducing the transit time at a reasonable cost compared to the SCR shipping by the 15,000-20,000TEU containerships. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 19

20 The container quick delivery scenario (1,091-1,233USD/TEU) using the 4,000TEU ice-class containership can be regarded as economically feasible as the SCR shipping (1,167-1,257USD/TEU) using the containerships of 4,000-8,000TEU, taking the extending NSR service period into account. However, the SCR shipping (836-1,003USD/TEU) using the containerships of 15,000-20,000TEU is much more competitive against the container quick delivery scenario (1,091-1,233USD/TEU) using the 4,000TEU ice-class containerships, whereas a transit time ( days) by the SCR shipping is longer than that (24.5days) of the container quick delivery scenario by days (2-2.5weeks). The container quick delivery scenario using the 4,000TEU ice-class containerships may attract some percentage of the potential demand, i.e. high-value and/or time-sensitive cardo, by the shorter transit time of 24.5days at a reasonable shipping unit cost of 1,091-1,233USD/TEU. However, further studies would be encouraged to examine how much of the high-value and/or time-sensitive cargo would be attracted by the container quick delivery scenario by the NSR/SCR-combined shipping, compared to the practical SCR shipping scenario using the 20,000TEU Mega-ships with the longer transit time of 42days at the lower shipping unit cost of 836USD/TEU. The containerships are able to practically maintain the scheduled navigation of a rotation time of 49days in the summertime (the NSR operation), as far as they sail at an average speed of at least 9Kn in the icy water section of the NSR. Furthermore, even if the containerships are stuck in the icy water section for hours, they are also able to practically recover the scheduled navigation of a rotation time of 49days, by sailing at an average speed of 10-11Kn in the icy water section and a nominal speed of 25Kn in the ordinary water section. This fact implies that the container quick delivery scenario between East Asia and Northwest Europe by the NSR/SCR-combined shipping proposed in this paper can be realized in the practical manner, satisfying a set of liner shipping principles, i.e. the same transit time, the same service day of the week and the same port calls in a rotation on a year-round basis. However, it should be noted that if the containerships are stuck in the icy water section for 120hours in June and early July, they are presumably able to recover the scheduled navigation. Acknowledgements The authors would like to thank the Ports and Harbors Association of Japan (PHAJ) and Waterfront Revitalization and Environment Research Foundation (WAVE) for providing a research fund. IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 20

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23 UENO, E., 2015, West-bound container cargo flows between Asia and Europe in 2014 (in Japanese, Japan Maritime Center), ( VERNY, J. and GRIGENTIN, C., 2009, Container shipping on the Northern Sea Route, International Journal of Production Economics, No.122, WANG, S. and MENG, Q., 2012, Liner shipping route schedule design with sea contingency time and port time uncertainty, Transportation Research Part B, 46, XU, H., YIN, D., JIA, F. and HUA, O., 2011, The potential seasonal alternative of Asia - Europe container service via Northern sea route under the Arctic sea ice retreat, Maritime Policy & Management, 38, No.5, IAME 2016 Conference August 23-26, 2016 Hamburg, Germany 23