"Trump Targets Greenland... Icebreaker Shipbuilders Benefit↑"

As the United States expresses its intention to control Greenland, interest is growing in the long-term possibility of domestic shipbuilders securing orders for icebreakers. Former President Trump considered purchasing Greenland, a Danish territory, in August 2019, and in December last year, when appointing a new U.S. ambassador to Denmark, he officially stated, "For national security and global freedom, American ownership and control of Greenland is necessary."

The Arctic route, including Greenland, is regarded as a region of high economic, military, and geopolitical value. From a military and strategic perspective, the primary goal is to check China and Russia. The U.S. already operates a missile defense system for tracking Chinese and Russian missiles through the North American Aerospace Defense Command (NORAD) at the Thule Air Base in northwestern Greenland. Additionally, it can block China’s Arctic expansion via the Belt and Road Initiative, and strengthen the Atlantic-European defense system with NATO through the deployment of nuclear submarines and strategic bombers.

Greenland is also an important area for resource acquisition. Seunghan Han, a researcher at SK Securities, analyzed, "The estimated rare earth deposits in Greenland are about 1.5 million tons, and according to the U.S. Geological Survey, approximately 13% of the world's undiscovered oil and about 30% of the world's undiscovered natural gas are estimated to be located in the Arctic Ocean, including Greenland."

Moreover, using the Arctic route can reduce the Asia-Europe sailing distance by about 30% compared to the existing Suez Canal route, and shorten the sailing time by about 10 days. Due to climate change, the reduction of Arctic sea ice is expected to expand the number of navigable days throughout the year.

However, this route is not very helpful for voyages between the U.S. and Europe, but it is expected to reduce canal tolls and freight costs on the U.S. (Gulf) to Asia route. Currently, the average Panama Canal toll for LNG carriers is about $300,000 to $500,000, and if the U.S. controls the Northwest Passage, it can expect cost savings similar to the tolls of Russia’s Northern Sea Route (NSR). However, proactive investment is needed for icebreaker ownership and infrastructure development.

Researcher Han stated, "Even if the U.S. controls the Northwest Passage (NWP), the likelihood of global shipowners and shipping companies placing orders for icebreaking LNG carriers (Arc7) or other ice-class vessels in the short term is low," adding, "Ice-class vessels are about 30-50% more expensive than regular ships, so using icebreaking services is more cost-effective." He also analyzed that a sufficient increase in the number of navigable days throughout the year is necessary to expect a real reduction in freight costs.

On the other hand, Russia continues to order icebreaking LNG carriers because it uses the Arctic route (NSR) as a year-round commercial route. Russia needs LNG carriers with their own icebreaking capabilities because icebreaking services alone cannot support all LNG transportation. Therefore, for the U.S. to control the Northwest Passage (NWP), it must secure icebreakers, but due to the decline and lack of capacity in the U.S. shipbuilding industry, building icebreakers in the short term is difficult.

Currently, under the Jones Act, the U.S. cannot use ships built at foreign shipyards for domestic operations. Researcher Han evaluated, "Unless the Jones Act is amended or exceptions ('national security exception' and 'exception for ships that cannot be built in the U.S.') are enacted, the possibility of Korean shipyards receiving icebreaker orders is low." Even if amendments are made, the U.S. signed the Icebreaker Collaboration Efforts (ICE) agreement with Finland and Canada in July last year, so it is unlikely to have a strong intention to use foreign shipyards.

However, in the long term, if the U.S. develops the Northwest Passage (NWP) as a commercial route through controlling Greenland, building icebreakers and port infrastructure, and expanding navigable days, there is a possibility that global shipowners’ demand for ice-class vessels will increase.

Researcher Han predicted, "Especially Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering), which has experience building icebreaking LNG carriers (Arc7), and Samsung Heavy Industries, which has experience building icebreaking oil tankers, are likely to benefit." Samsung Heavy Industries has experience collaborating on icebreaking LNG carrier and icebreaking shuttle tanker construction projects with Russia’s Zvezda Shipyard, but these projects were suspended after international sanctions on Russia.

Ultimately, if the U.S. intensifies its strategic moves around Greenland and activates the Northwest Passage, it is analyzed that long-term opportunities may arise for the Korean shipbuilding industry as well.