On the cost of ice: estimating the premium of Ice Class container vessels
- 232 Downloads
Cargo vessels navigating ice-infested waters have to comply with additional requirements including a strengthened hull and additional engine power, modifications that affect their operational economics. This paper analyses the additional cost of ice imposed on container vessels conforming to the most commonly used Finnish-Swedish Ice Class Rules. Cost estimations are based on descriptive statistics and regression analysis. The aim is to assess the reportedly higher costs of IA and IA Super Ice Class vessels compared with lower-classed or conventional vessels. Our analysis reveals that Ice Classed vessels incur significantly higher fuel and capital costs. This increases the shipping costs of Ice Classed vessels in open water by 9% (1 USD/TEU/day) compared with the other vessels under review. In wintertime, Ice Classed vessels unit costs could be up to 4 USD/TEU/day higher than for vessels in the reference group in open water. Our findings contribute to the discussion on the economics of shipping in winter conditions, and on the imposition of environmental regulations in the industry when operating in ice-infested waters. These themes have been scantly covered in extant literature, but are important for countries with trade depending on winter navigation.
KeywordsIce Class fleet Winter navigation Container shipping Cost structure Cost differentials
The authors would like to thank the anonymous reviewers and the editor-in-chief for their valuable comments in developing this paper. We would also like to acknowledge the Jenny and Antti Wihuri Foundation for their financial support.
- Bunker Index. 2015. Available at http://www.bunkerindex.com/. Accessed June 2015.
- CRSL; Clarkson Research Services Limited. 2015. Clarksons World Fleet Register. https://www.clarksons.net/wfr2/. Accessed Jan 2015.
- Cullinane, K., and M. Khanna. 1999. Economies of Scale in Large Container Ships. Journal of Transport Economics Policy 33 (2): 185–208.Google Scholar
- Drewry. 2012. Ship Operating Costs Annual Review and Forecast: Annual Report 2012/13. London: Drewry Shipping Consultants.Google Scholar
- Dvorak, R.E. 2009. Engineering and Economic Implications of Ice-Classed Containerships. MSc Dissertation. Massachusetts Institute of Technology, Cambridge, MA.Google Scholar
- Federal Reserve. 2016. Foreign exchange rates, Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/releases/h10/hist/. Retrieved 21 Apr 2015.
- Finnish Transport Safety Agency. 2011. Guidelines for the application of the Finnish-Swedish ice class rules. TRAFI/21816/03.04.01.01/2011 Helsinki, 20 December, 2011.Google Scholar
- Krugman, P. 1991. History and Industry Location: the Case of Manufacturing Belt. The American Economic Review 81 (2): 80–83.Google Scholar
- Lasserre, F. 2014. Case Studies of Shipping Along Arctic Routes. Analysis and profitability perspectives for the container sector. Transportation Research Part A 66: 144–161.Google Scholar
- Lloyd’s Register. 2015. LR to class 3600 TEU Container Ships for Maersk Line—First Boxships to be Built at COSCO Zhoushan. http://www.lr.org/en/news/news/LR-to-class-3600-teu-container-ships-for-Maersk-Line-first-boxships-to-be-built-at-COSCO-Zhoushan.aspx. Accessed 28 Oct 2015.
- Maersk. 2015. Maersk Line Orders Seven Ice-Class Container Vessels. http://www.maerskline.com/ro-ro/countries/int/news/news-articles/2015/03/seven-ice-class-container-vessels. Accessed 28 Oct 2015.
- MAN Diesel & Turbo. 2013. Ice Classed Ships. Copenhagen: MAN Diesel & Turbo.Google Scholar
- Riska, K., and J. Kämäräinen. 2011. A Review of Ice Loading and the Evolution of the Finnish-Swedish Ice Class Rules. Transactions of the Society of Naval Architects and Marine Engineers 119: 265–298.Google Scholar
- Riska, K., Wilhelmson, M., Englund, K. (1997) Performance of merchant vessels in ice in the Baltic, Finnish Maritime Administration, Winter Navigation Research Board, Research Report No. 52.Google Scholar
- Wijnolst, N., and T. Wergeland. 2009. Shipping Innovation. Amsterdam: IOS Press.Google Scholar
- World Shipping Council. 2015. http://www.worldshipping.org/. Accessed 27 Oct 2015.
- WTO. 2015. World Trade Organization Statistics Database.Google Scholar