Arctic sea routes: opportunity for global trade

Why Arctic sea routes are becoming more important for global trade

Global maritime trade is heavily concentrated on three economic regions: East Asia, North America, and Europe. Between these regions, key goods flows run through established corridors such as the Panama Canal, the Suez Canal, or currently increasingly around the Cape of Good Hope. According to the international credit insurer Coface, shipping transports more than 80% of internationally traded goods.

The recent geopolitical upheavals have put this structure under pressure. Attacks in the Red Sea, rerouting away from the Suez Canal, and changed trade flows between China, the US, Vietnam, and Mexico show how vulnerable traditional routes have become. In this environment, Arctic sea routes are gaining strategic attention, as emerges from a Coface study on Arctic trade routes.

Three routes are at the center: the Northern Sea Route along the Russian Arctic coast, the Northwest Passage between Canada and Greenland, as well as the Transpolar Route across the Arctic Ocean. So far, it is mainly the Northern Sea Route that is commercially relevant. In 2025, 103 transit voyages were registered there, after 97 in the previous year. According to Coface, the cargo transported nevertheless corresponded to only about one normal week of transit through the Suez Canal.

What advantages do Arctic shipping routes offer?

The most important advantage lies in shorter distances. On the East Asia-Europe connection, the Northern Sea Route can shorten the distance by 30 to 40 % compared with the Suez Canal. Compared with the currently frequently used route around the Cape of Good Hope, the saving can even reach 40 to 50 %.

Also on the connection between East Asia and the east coast of North America, the Northwest Passage and the Transpolar Route shorten the distance by around 20 %. That potentially reduces travel times, fuel consumption and costs. In addition, certain geopolitical risks fall away, such as those along the Red Sea.

However, use remains seasonally limited. At present, transit voyages are concentrated in the warmest months of the year. For the Northern Sea Route, the time window currently extends roughly from July to October, and for the Northwest Passage until November. This time window does coincide with the peak season in global maritime traffic, but remains operationally tight.

Why container shipping benefits hardly at all

For the industry, the central question is not only the route length, but profitability per transport unit. For this purpose, Coface compared transport costs for containers, tankers and bulk carriers on the Shanghai-Rotterdam and Shanghai-New York routes.

The result is clear: Container traffic via Arctic sea routes remains economically unattractive so far. Even without icebreaker escort, the transpolar route is 28% more expensive in the model than the Panama Canal route and 33% more expensive than the Suez Canal route.

The reason is not only Arctic-specific costs. The decisive factor is ship size. Container ships that can be used in the Arctic have significantly lower capacities than those on established corridors. The lower utilization per TEU outweighs the distance advantages.

For manufacturers of industrial goods, machinery, components, furniture, or automobile parts, this means: In the short term, no fundamental shift of containerized supply chains to the Arctic is to be expected.

Which goods are Arctic sea routes suitable for?

The situation is different for bulk goods. Liquid bulk goods such as crude oil, liquefied natural gas, or other energy sources can benefit significantly. Coface calculates possible cost advantages of up to 45% to 50% in certain constellations.

Dry bulk goods such as grain, metals, minerals, or wood products can also become economically attractive. This is particularly relevant for exports from North America and Northern Europe to East Asia. The analysis mentions, among other things, grain from the USA and Canada, mineral fuels from the USA, iron ore from Canada, as well as wood and paper products.

If icebreaker escort is required, the Northern Sea Route and the Northwest Passage remain less competitive in most cases. Without icebreakers, that is, with ice-strengthened ships, the picture improves significantly. Then Arctic sea routes can become economically viable for liquid bulk cargoes and, in part, for dry bulk cargoes.

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How large is the market potential really?

Despite the cost advantages, the short-term volume remains limited. Coface estimates that only around 3.5% of the existing trade between East Asia, North America, and Northern Europe is likely to be suitable for Arctic sea routes within the time horizon considered.

If the seasonally available potential is fully utilized, the trade value via the Arctic could reach up to 64 billion USD. For exports from the North American East Coast and from the Gulf of Mexico to East Asia, Coface cites around 22 billion USD. That would correspond to about 7% of current exports to this region.

For the Nordic countries, the potential is around 2 billion USD or likewise about 7% of their exports to East Asia. This mainly concerns dry bulk cargoes, energy products, and individual tanker cargoes.

Why geopolitics remains more important than costs

The Arctic is not a conflict-free alternative route. The Northern Sea Route runs predominantly through Russian waters. Russia largely controls administration, pilot services and icebreaker services through state-influenced structures. At the same time, sanctions, the war between Russia and Ukraine as well as the closer relationship between Russia and China have exacerbated the geopolitical situation.

Around 95 % of transit voyages on the Northern Sea Route recently were attributable to traffic between China and Russia. South Korea accounted for about 5 % in 2025. Icebreaker capacities are also strategically relevant: according to Coface, Russia has a little more than half of the global icebreaker fleet, Canada around 17 %, Finland about 10 %. The Nordic countries in Europe together account for around 23 %.

This creates a risk for Europe: the region could lose influence in an emerging Arctic order, although it traditionally played a role through research, environmental governance and economic cooperation.

The riskiest bottlenecks in global shipping traffic

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Which sectors could win or lose?

Potential winners are above all resource-related sectors in North America and Northern Europe. These include grain, energy, metals, wood, pulp and paper. Shorter delivery times and lower transport costs could improve their position in East Asian markets.

Competitors from South America and Africa, on the other hand, could come under pressure. Coface mentions, among others, Brazil in mineral fuels, iron ore, pulp and grain, Chile in copper, Argentina in grain, as well as South Africa and the Democratic Republic of the Congo in certain raw materials.

Infrastructure locations could also be affected in the long term. Egypt and Panama generate direct revenue from canal fees. Before the disruptions in the Red Sea, according to Coface these accounted for around 2% of GDP in both countries. Port locations along established routes, such as Singapore or Jebel Ali, could also lose traffic in the event of a later shift.

In the short term, however, this risk remains limited. Since container traffic via Arctic sea routes does not appear economical until 2030, no rapid shift of central industrial and consumer goods flows is to be expected.

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