Arctic Shipping Routes Become Reality: Busan, Ulsan, and Yeongilman Ports Develop Strategies

The melting ice in the Arctic is reshaping the global shipping map. The South Korean government has identified the Arctic route as a new axis for national growth, accelerating pilot operations, the establishment of special laws, and the development of key ports. Busan, Ulsan, and Yeongilman ports are each knocking on the door of the Arctic. This report examines the changes the Arctic route will bring to domestic port dynamics and the competitiveness Ulsan Port must secure.

The Arctic route is no longer just a distant future shipping lane. On August 22, the 2,758 TEU container ship 'Panstar Acro' will depart from Busan New Port, navigating the Northeast Passage to the UK’s Felixstowe, the Netherlands’ Rotterdam, and Poland’s Gdansk. This marks the first time a container ship has been deployed for a pilot operation on the Arctic route since 2016.

Using the Northeast Passage from Busan to Rotterdam will cover approximately 13,000 kilometers, about 35% shorter than the existing route through the Suez Canal, which is around 20,000 kilometers.

This reduction in distance is not merely a logistical advantage. The strategic value of the Arctic route increases as it provides an alternative supply chain amid growing geopolitical risks in existing maritime logistics networks, such as the Suez Canal and the Red Sea.

The government’s actions have also accelerated. The 'Special Act on Promoting the Use of the Arctic Route and Supporting Related Industries' was enacted on June 16 and will take effect on December 17. A committee chaired by the Prime Minister will establish five-year basic and implementation plans, laying the institutional groundwork for research and development, training professionals, and providing financial support to related businesses.

The Ministry of Oceans and Fisheries is currently drafting enforcement regulations that include the operation of the Arctic Route Committee and the criteria for designating the Arctic Route Comprehensive Support Center.

The government has begun to clarify the roles of ports in the Arctic route era. The Ministry of Oceans and Fisheries has outlined a clear vision for the second half of the year: Busan Port will focus on 'containers,' while Ulsan Port will develop as a key hub for 'energy' in Arctic logistics.

Busan Port is leading the charge. Last year, it handled 24.88 million TEUs of containers, with transshipment cargo accounting for about 14.1 million TEUs. The port's vast global shipping network, transshipment volume, and dense regular routes are its greatest assets.

The fact that the government’s pilot operation is starting from Busan is not unrelated to this background.

Busan Port Authority is collaborating with the Korea Maritime Institute, the Korea Polar Research Institute, and the Ship and Ocean Plant Research Institute to accelerate strategies for developing Busan Port as a hub for eco-friendly and low-carbon Arctic routes.

Busan City has also signed an agreement with Panstar, the operator of the pilot service, to share information on route conditions, cargo transport, and vessel operations during the voyage, aiming to clarify Busan's role and support system in the future.

However, Busan Port faces challenges. If future vessels navigating the Arctic route quickly transition to eco-friendly fuels such as LNG, methanol, and ammonia, it will need to establish large-scale bunkering infrastructure.

Sung Sang-geun, CEO of Busan Port Authority, stated during a report to the Ministry of Oceans and Fisheries that "infrastructure for bunkering such vessels is necessary at Busan Port," adding that plans are being developed with a target operation date of 2030.

Ulsan Port's strategy differs from Busan's. Rather than competing in the same manner as the global container transshipment hub of Busan, Ulsan aims to leverage its existing energy industry and liquid cargo handling capabilities in connection with the Arctic route.

Ulsan Port is the largest liquid cargo port in South Korea. In June of this year, liquid cargo accounted for approximately 78% of the total cargo volume of 15.27 million tons, with 11.93 million tons being liquid.

The port has 35 berths for liquid cargo, five buoys, and 67 docking spaces. It boasts 802 commercial tank terminals with a storage capacity exceeding 4.54 million cubic meters. The concentration of refining, petrochemical industries, and large storage facilities, along with loading and piping infrastructure, is a unique strength of Ulsan.

Most notably, Ulsan Port has actual experience with vessels operating on the Arctic route. Over the past decade, 18 Arctic route vessels have called at Ulsan, the highest number among domestic ports, with five visits via the Northeast Passage and 13 via the Northwest Passage.

On August 20, Ulsan Port Authority, the Korea Maritime Promotion Corporation, and the Dutch shipping company Royal Bagenborg, which has extensive experience in commercial cargo transport on the Northwest Passage, signed a tripartite agreement.

Royal Bagenborg has recorded 48 commercial cargo transport operations on the Northwest Passage as of last year. The three organizations agreed to collaborate on the calls of Arctic route vessels at Ulsan Port, expanding the supply of eco-friendly fuels, sharing operational information and experiences, establishing a domestic Arctic route operation manual, and identifying potential cargo between Korea and North America.

This year, up to four vessels passing through the Arctic route are expected to call at Ulsan Port for fuel supply and cargo handling.

The government's focus on utilizing not only the Northeast Passage but also the Northwest Passage connecting Korea and the eastern United States presents another opportunity for Ulsan Port. The distance from Ulsan to Quebec, Canada, using the Northwest Passage is approximately 13,500 kilometers, about 35% shorter than the route via the Panama Canal.

Byun Jae-young, CEO of Ulsan Port Authority, stated that this agreement will serve as a practical foundation for implementing the government's Arctic route policy, aiming to enhance the Arctic navigation capabilities of the domestic shipping industry and strengthen port competitiveness.

Traveling north along the East Coast leads to Yeongilman Port in Pohang. While smaller than Busan and Ulsan, the Gyeongbuk Province and Pohang City plan to create an 'Arctic route specialized port' by leveraging its geographical proximity to the Arctic, along with its steel and secondary battery industries and port access railroads.

Last year, Yeongilman Port handled 62,310 TEUs of container cargo, a 2.7% increase from the previous year. The frequency of port access rail operations has also increased from 10 to 15 times a week.

Currently, a 670,000 square meter phase one port hinterland is being developed, with plans for additional hinterland and port facility expansions underway.

Pohang City is preparing a basic plan for the expansion of Yeongilman Port and strategies to respond to the Arctic route, while also pursuing the establishment of long-distance routes and port sales targeting shippers.

Gyeongbuk Province envisions developing Yeongilman Port into a key hub for bulk cargo and energy logistics in the East Coast region, leveraging the Arctic route.

However, not all perspectives are optimistic. Some members of the Pohang City Council have raised concerns about investing excessive administrative resources and budgets into the Arctic route project, given the current lack of sufficient shipping lines, shippers, and cargo volumes to Europe. They argue that preparing for future routes is different from creating a profitable port.

This concern is not unique to Pohang.

The Arctic route's shorter distance on the map does not automatically translate to an economical shipping route. The Ministry of Oceans and Fisheries also emphasizes the importance of securing route data, operational experience, and professional personnel, along with stable cargo demand, before the Arctic route can be fully commercialized.

The Northeast Passage, which passes along the Russian coast, faces issues such as the need for prior approval from Russian authorities and icebreaking support, while Western sanctions against Russia remain a key variable for commercial operations. Recently, concerns have been raised in the West regarding the potential for cooperation with Russia surrounding the domestic Arctic route pilot operations, highlighting geopolitical risks.

Considering winter ice, high insurance costs, icebreaker support fees, and the costs of securing ice-class vessels, it is difficult to assess economic viability based solely on distance reduction.

This is why the government prioritizes securing operational experience and route and logistics data over immediately linking this pilot operation to the establishment of regular routes.

Ultimately, the competition among Busan, Ulsan, and Yeongilman ports will not be determined merely by who first claims the title of 'Arctic route hub.' Busan has a world-class container and transshipment network, Ulsan has energy and vessel fuel supply chains, and Yeongilman aims to combine steel and secondary battery industries with northern logistics.

The assets and target markets of the three ports differ significantly. The competition for Arctic route ports has just begun. The key question is not who will first hang the sign of 'Arctic route hub,' but who will create compelling reasons for vessels and cargo traveling to and from the Arctic to choose their port.

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