Baffinland CEO says no to shipping ore through Northwest Passage
Chief executive Tom Paddon says shipping route is too shallow for iron ore and coal carriers
By PAUL WALDIE
The head of a Canadian mining company developing a massive mineral deposit within the Arctic Circle said the Northwest Passage won't work as a viable shipping route to Europe and Asia.
Baffinland Iron Mines Corp., which is owned by steel giant ArcelorMittal and private equity firm Iron Ore Holdings LP, is building one of the largest iron ore mines in the world on Baffin Island in Nunavut. The $750-million Mary River mine is on track to open in 2015 and the ore will be shipped to Europe.
"In my opinion the Northwest Passage is not a transit route of any significance," Tom Paddon, Baffinland's chief executive, told the Arctic Futures 2013 conference in Brussels on Thursday.
Mr. Paddon said one problem is the Northwest Passage's depth, which prevents it from becoming a major trade route. Many commodities such as iron ore and coal are shipped on bulk carriers that need a depth of up to 19 metres, also known as "capesize" vessels. Much of the Northwest Passage is only 15 metres deep.
"So the iron ore business is not looking to move material from one side of the world to the other through the Northwest Passage unless somebody invents a different way to sail a boat," he said.
His opinion conflicts with that of the Canadian government, which has gone to great lengths to push utilization of the Northwest Passage as a way to ensure Canadian sovereignty in the North. Canada is also worried that Russia's rival Northern Sea Route will develop more quickly as a shipping alternative.
The federal government helped sponsor the recent voyage from Vancouver to Finland of a Danish ship loaded with metallurgical coal, which is used to make steel. The ship was the first bulk carrier to sail through the Northwest Passage and the voyage was hailed as proof that the route provides a faster and cheaper alternative to the Panama Canal.
Some experts agree with Mr. Paddon.
Kathrin Keil, a scientist at Germany's Institute for Advanced Sustainability Studies, dismissed the trip, noting that the Danish ship was escorted by a Canadian Coastguard vessel. "These are all stunts," she said during a break in the Arctic conference. "These are just to show we have the technology to do it. They have nothing to do with trade."
Ms. Keil said Arctic shipping in general is too expensive to become a real alternative to traditional routes, even though the northern trips are much shorter. She told the conference that just 46 ships crossed Russia's Northern Sea Route last year and only 40 have made the trip this year. Many of those trips were domestic voyages within Russia and did not go all the way through to Asia. By contrast, 18,000 ships use the Suez Canal annually and 13,000 ply the Panama Canal.
"It's a niche," she said referring to the Arctic route. "For certain ships, for certain commodities, for a certain time of the year."
She added that among the advantages of the longer southern voyage is the opportunity to stop at ports along the way, something that can't happen in the Arctic. "You want to call at all these other ports. You want to actually serve all these other markets too," she said.
Arctic shipping will remain largely "destinational," or for specific purposes such as sending supplies to mining companies or moving resources to ports, she said. "But [the Arctic] is not an all year round, global maritime trade route. That's not what it is and probably won't be."
Anders Backman, an expert on Arctic shipping from the University of Gothenberg in Sweden, told the conference that he also did not believe shipping would increase significantly in the North because of the expense and difficult sailing conditions. "Maybe it will increase compared to today," he said. "But it will not be dramatic."
