On the cost of ice: estimating the premium of Ice Class container vessels

Original Article

Abstract

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.

Keywords

Ice Class fleet Winter navigation Container shipping Cost structure Cost differentials 

Notes

Acknowledgements

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.

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Copyright information

© Macmillan Publishers Ltd 2017

Authors and Affiliations

  1. 1.Operations and Supply Chain Management, Turku School of EconomicsUniversity of TurkuTurkuFinland

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