Abstract In recent decades, Antarctic sea ice has expanded slightly while Arctic sea ice has contracted dramatically. The anthropogenic contribution to these changes cannot be fully assessed unless climate models are able to reproduce them. Process-based evaluation is needed to provide a clear view of the capabilities and limitations of such models. In this study, ice concentration and drift derived from AMSR-E data during 2003–10 are combined to derive a climatology of the ice concentration budget at both poles. This enables an observational decomposition of the seasonal dynamic and thermodynamic changes in ice cover. In both hemispheres, the results show spring ice loss dominated by ice melting. In other seasons ice divergence maintains freezing in the inner pack while advection causes melting at the ice edge, as ice is transported beyond the region where it is thermodynamically sustainable. Mechanical redistribution provides an important sink of ice concentration in the central Arctic and around the Antarctic coastline. This insight builds upon existing understanding of the sea ice cycle gained from ice and climate models, and the datasets may provide a valuable tool in validating such models in the future.