The Arctic is melting at an unprecedented rate, and that’s good news for Finland, the world’s leading supplier of icebreakers.
“You would think we don’t need icebreakers anymore because of the melting ice,” said Stefan Lindström, counselor at the Finnish foreign ministry’s North America unit. “But it’s actually the opposite.”
Ice levels fell to record lows this winter. Some Arctic monitoring stations recorded temperatures that were as much as 9 degrees Celsius above normal. And this year’s maximum ice cover was even less than in 2015, which was also a record-breaking year.
That’s bad news for polar bears and people living on low-lying islands, but the shrinking ice cap is also opening up new opportunities in this Nordic country. Offshore oil and gas drillers, especially from Russia, crude and LNG tankers, cargo ships, research scientists and militaries are pushing north because it’s more accessible due to the melting ice. They all still need icebreakers.
Aker Arctic saw its revenues jump 40 percent last year to €14 million after it helped design ice breaking vessels that can carry liquefied natural gas.
“It used to be that it was too difficult to go [in the Arctic], but ship owners are now looking at more opportunities,” said Arto Uuskallio, sales and marketing director at Aker Arctic, a Finnish ship design and engineering company whose clients include international oil and gas companies, as well as various coast guards. “But you still have the ice there and need to be prepared for the conditions.”
Although Finland doesn’t have an Arctic Ocean coastline, it does have a lot of experience in building icebreakers — about 60 percent of today’s global fleet was designed and built in Finland. And the industry is expecting sales to ramp up in the coming years.
New transport routes
More open seas mean ships can travel through the Northwest Passage, running through the Canadian Arctic Archipelago. There is also more interest in the Northern Sea Route, running along the Russian coast.
A recent report from the Washington-based Wilson Center found modern icebreakers will make it easier to access the Northern Sea Route, which cuts the travel distance from Europe to the Asia Pacific region by 40 percent compared to the traditional route through the Suez Canal. The route will also lead to a surge in hydrocarbon development, the report said.
“If you start using the Northern Sea Route, you will need icebreakers more than ever,” Lindström said.
While the route was less used for trans-continental shipping over the last years, cargo to and from Russian ports along the route increased from 2.8 million tons in 2013 to 4.5 million tons in 2015, Russia’s Deputy Minister of Transport Viktor Olersky said in October.
Greater interest in Arctic shipping is reflected in the bottom lines of Finnish companies involved in the shipbuilding sector.
Aker Arctic saw its revenues jump 40 percent last year to €14 million after it helped design ice breaking vessels that can carry liquefied natural gas, a technology that will be applied to 15 upcoming vessels. The fleet will service Russia’s $27 billion Yamal Peninsula project, meant to produce 16.5 million tons of LNG per year at full capacity.
The tankers, owned by international shipping companies, will be the longest and widest icebreakers ever built, able to break 2.1 meter-thick ice. They will be delivered this year, with drilling operations at the site meant to start next year.
“Last year was very big,” Uuskallio said, cautioning that forecasting is difficult in such a niche sector.
Helsinki’s Arctech Helsinki Shipyard has a €600 million order backlog, mostly for icebreakers meant to support Russia’s oil and gas operations. The Finnish shipyard is owned by Russia’s United Shipbuilding Corporation.
Arctech is scheduled to deliver four icebreakers to Russia’s largest shipping company Sovcomflot this year and next to help operations at the country’s Sakhalin offshore oil and gas fields. It also delivered one to Russia’s transport ministry last year.
The shipyard delivered only two icebreakers — both to Sovcomflot — in 2012 and 2013, and prior to that its last delivery was in 2006, according to information on the company’s website.
Looking to Uncle Sam
Finnish companies also hope to tap into growing government interest in the Arctic.
“With this declining ice … the navies see that they have to be able to operate there, or at least be able make a surveillance and know what’s happening in the Arctic area,” Uuskallio said. His company has been receiving an increasing number of inquiries from foreign governments “interested in the designs that we are doing, what is possible and what is not possible to do,” he said.
Aker Arctic is helping design a new icebreaker for the Canadian Coast Guard, a project which nevertheless has been severely delayed and has seen its costs double over the last years. The Finnish company has also helped design a new polar research icebreaker for China.
“Our wish and thinking is that those icebreakers will be built in Finland.” — Tero Vauraste, CEO of Arctia
Industry officials are also eager to gain a foothold in the U.S., which plans to acquire a new icebreaker fleet. The U.S. currently has two 40-year-old icebreakers, while Russia has 40, with 11 under construction.
In January, the U.S. Coast Guard outlined requirements for two new icebreakers, which could cost $1 billion each. U.S. President Barack Obama in September called for the first icebreaker to be delivered by 2020, instead of the previous goal of 2022, as melting ice increases pressure on the U.S. to expand its presence in the far north.
However, there’s not much chance of Finnish yards getting much of a taste of that business, as the U.S. reserves military contracts for domestic producers.
“Our wish and thinking is that those icebreakers will be built in Finland,” said Tero Vauraste, the CEO of Arctia, the Finnish state-owned company responsible for operating the country’s icebreaker fleet. “We don’t know if that will be the case, but there is still a huge gap before those icebreakers arrive.”
Still, six Finnish companies, including Aker Arctic and Arctia, took part at an industry-focused event hosted by the U.S. Coast Guard in January, exploring other ways they could participate in the construction process, Charles C. Adams, the U.S. ambassador to Finland, said at a conference in Lapland in early April.
Meanwhile, Arctia is also putting together a research expedition in the Arctic region for the summer of 2017, hoping countries such as South Korea, France, Germany or Japan will pay to send their scientists to the north.
It is “for those countries that don’t have that much Arctic shipping capabilities on their own and are thinking ‘let’s join forces,’” Vauraste said.
