Analyzing the Impact of the Northern Sea Route on Tramp Ship Routing with Uncertain Cargo Availability

Abstract

The opening of the Northern Sea Route (NSR) provides an alternative in connecting Asia and Europe. We evaluate the impact of the NSR on tramp shipping through a two-stage stochastic programming model featuring tramp ship routing and scheduling with uncertain cargo availability. Decisions regarding deterministic cargoes with known availability are made in the first stage and decisions regarding spot cargoes and detailed routing and scheduling plans are made in the second stage when the available spot cargoes are revealed. We solve the problem by Sample Average Approximation. The case study shows that the introduction of the NSR leads to an increase in gross margin. It allows picking up more cargoes or picking up cargoes with higher revenues. The advantages of the NSR are more obvious when the bunker price increases. The effect of the NSR on tramp ship routing decisions depends on the region. The effect is most significant for transportation between Northern Asia and Northern Europe, while less interesting to Southern Asia. In general, the NSR is more favored than the Suez Canal Route for both transporting cargoes and repositioning vessels.