The impact of ice class on the economics of wet and dry bulk shipping in the Arctic waters

Abstract

ABSTRACTShipping in Arctic waters is subject to technical requirements posed by harsh ambient conditions. Vessels operating in ice-infested waters need reinforced hulls and more powerful engines, for example. These requirements are reflected in the vessel’s ice class, which has specific implications not only for operational issues but also for shipping economics. This article examines the extent to which the shipping costs of wet and dry bulk vessels compliant with the International Association of Classification Societies (IACS) Polar Class rules exceed those of vessels without an ice class.Descriptive statistics and multiple regression analysis were used to estimate differentials in capital and fuel costs, as well as in cargo-carrying capacity. The applied dataset, obtained from two major shipping registries, includes technical details of 21,352 bulk vessels, of which 711 possessed a PC, and the remaining 20,641 comprised the reference category.The results show that Polar Class compliant vessels could be up to three times more expensive to build than vessels without an ice class. Moreover, the respective increase in fuel costs may account for up to 150 per cent given the additional engine power and the increased hull weight. Finally, the reduction in cargo-carrying capacity amounts to 20 per cent compared to the reference category.