In Legislative Inquiry, Concerns Raised Over Royal Arctic Line’s Charter Agreements
In a recent move that has captured the attention of both government and industry observers, Bentiaraq Ottosen, a member of Inatsisartut representing Atassut, has formally queried the Naalakkersuisut about the charter agreements of Royal Arctic Line A/S (RAL). This inquiry, made under clause 37, underscores the growing scrutiny of public spending practices in the realm of maritime logistics.
Aqqaluaq B. Egede, the Naalakkersuisut’s Minister for Social Affairs, Labor Market, Housing, Infrastructure, and Outlying Districts, revealed that RAL allocates a staggering amount—reaching into the double-digit millions—annually to rent foreign container ships. This financial commitment raises eyebrows, especially given the potential for investing those resources elsewhere in the community.
Long-term Agreements in Focus
RAL operates a fleet comprising ten vessels, yet its reliance on charters from other shipping companies has become a notable issue. Egede further clarified that RAL’s vessels are sometimes chartered out to third parties, suggesting a complex interdependence in the shipping sector.
One of the key agreements involves a Vessel Sharing Agreement (VSA) with Eimskib, an Icelandic logistics company based in Reykjavík. This collaboration allows RAL to share space on ships operating between Reykjavik and Nuuk. Specifically, RAL contributes one ship while Eimskib provides two, ensuring that RAL can utilize the full cargo capacity for the vital Iceland-Greenland trade route. Notably, this VSA has been in place for approximately five years, culminating recently in RAL’s sale of the container ship Mary Arctica to Eimskib, which has since been renamed Silver Mary. RAL has also committed to charter this vessel for at least 180 days each year, resulting in three ships currently tied to long-term agreements.
Short-term Arrangements
In addition to long-term commitments, RAL has also engaged in short-term charters. In 2023, for instance, RAL temporarily chartered the Liberian-owned container ship Jonni Ritscher while Tukuma Arctica underwent repairs. Looking ahead, the ship Silver Arctica is slated for charter in 2025 during the renovation of the port in Maniitsoq. Together, these short-term charters account for two vessels secured in the upcoming years.
Financial Implications
Amid these operational details, Ottosen is seeking clarity on RAL’s projected expenditures for chartering container ships in 2024, to which RAL responded that this year’s expenses reached approximately DKK 40 million. Furthermore, the company noted that the average chartering costs from 2022 to 2025 are expected to be around DKK 33 million annually. For context, the annual operating costs for Malik Arctica (excluding fuel) fell between DKK 36 and 39 million during the same period.
Cumulatively, RAL’s financial outlay has surpassed DKK 1.1 billion from 2021 to 2025, with charter costs representing an average of just 2.8% of total expenditures.
A Call for Independence
RAL has reached an agreement with the Naalakkersuisut to progressively increase freight rates between 2024 and 2026 to facilitate the modernization of its fleet, as many vessels approach the end of their operational viability. The planned rate hikes are set at 3.1% for 2025 and 2.2% for 2026. In light of these financial pressures, Ottosen expressed concerns regarding RAL’s continued reliance on costly foreign charters, describing it as “unacceptable.”
“RAL should strive for independence from external shipping companies. Funds allocated for charters could instead enhance other societal needs, rather than being funneled into foreign enterprises,” Ottosen remarked.
In a shift of roles, Ottosen resigned last November from his previous post as Minister for Social Affairs, Labor Market, Internal Affairs, and the Environment. He is now actively campaigning for a return to office in the upcoming general elections, indicating his commitment to addressing these pressing issues in Greenland’s political landscape.