[Expanded] Piracy Update: attacks spread south as South Africa signs pacts with Kenya, Tanzania and increase in West Africa, too–but what is the real impact on shipping?

“SADC should act strongly against pirates” from the Institute for Security Studies:

The lack of prey and the constant attention of the international fleet participating in Operation Atlanta​ are forcing pirates to move their operations south, towards areas outside the operational arena of the international fleet. Acts of piracy are also increasingly occurring further away from the mainland in international waters. This migration of pirate activity from Somalia is exerting pressure on coastal countries such as Tanzania to step up their efforts to protect vessels traversing their territorial waters.

 Tanzanian President Jakaya Kikwete commented during his recent visit to South Africa that Tanzania has experienced almost 30 pirate attacks and that the increasing number of incidents are starting to affect the economy of Tanzania and by extension the whole of Eastern Africa. The impact is the result of ships preferring not to visit the ports in Tanzania due to the risk of becoming the victims of pirate attacks.

South Africa, in an effort to curb piracy before it reaches its doorstep, has committed its maritime resources to the fight against pirates. The main motivation for this approach seems to be to fight pirates in the waters of its neighbours whilst ensuring that the South African shipping lanes remain safe and open for business.  Although the South African National Defence Force remains stoically silent about their strategic plan to get involved in the fight against piracy, the actions of the Government support the conceptual properties of a plan of this nature.

The agreements signed between South Africa and other Eastern African countries concerned about the impact of piracy on their economies contributes to this understanding. These countries are Mozambique, Tanzania, Kenya, the Seychelles, the Comoros, Madagascar and Reunion. . . .

In the meantime, “Piracy Rises Off of West Africa”  notes an AP item in the NY Times.  “‘Piracy soars’ off coast of Benin” reports the BBC.

Here is the link to the website of the “Save Our Seafarers” campaign,  “one of the biggest ever maritime industry groupings, comprising twenty five of the world’s biggest maritime organizations”:

Over 400 seafarers are being held hostage by armed gangs of Somali pirates, in appalling conditions, subject to physical and psychological abuse.

Their ships have been hijacked at sea and they are being held for ransoms of millions of dollars. The human cost to seafarers and their families is enormous.

This affects YOU. Piracy is beginning to strangle key supply routes. 90% of the world’s food, fuel, raw materials and manufactured goods is delivered by sea. Nearly half of the world’s seaborne oil supply passes through the pirate-infested parts of the western and northern Indian Ocean.

But the world’s politicians don’t seem to realise the severity of the crisis. World trade is under threat. Piracy costs the global economy $7-12bn a year. Yet even when caught red handed by naval forces, 80% of pirates are released to attack again.

You can help stop this hostage-taking and help restore the freedom of the seas. Please add your voice to our worldwide call for government action. More robust laws, stronger enforcement and firmer political resolve are needed to stop these pirates.

.  .  .  .

We understand the problems Somalia faces (the most prolific area for attacks) after 20 years of vicious civil war but we believe our innocent seafarers and the global economy have the right to protection.

All we ask is for Governments to take a firmer stance to help eradicate piracy.

We need committed action now and want governments around the globe to prioritise six key actions:

  • Reducing the effectiveness of the easily identifiable motherships
  • Authorising naval forces to hold pirates and deliver them for prosecution and punishment
  • Fully criminalising all acts of piracy and intent to commit piracy under national laws, in accordance with their mandatory duty to co-operate to suppress piracy under international conventions
  • Increasing naval assets available in the affected areas
  • Providing greater protection and support for seafarers
  • Tracing and criminalising the organisers and financiers behind the criminal networks

And, in case you missed it, here is an article from several weeks ago in Bloomberg/Business Week on the “arms race” against piracy.

UPDATE:  The Guardian today has a David Smith story “Piracy off west Africa increases sharply”:

Pirate attacks off the coast of west Africa have increased sharply, figures show, raising fears that the region could emulate Somalia as a menace to shipping.

Nigeria and Benin have reported 22 piracy incidents so far this year, including two in recent days, the International Maritime Bureau (IMB) said. Benin did not suffer any such attacks last year.

“I believe we are nearly at a crisis here, and if it’s a crisis there has to be action,” Rear Admiral Kenneth Norton, of the US Naval Forces Europe-Africa, told the Associated Press.

Piracy in the Gulf of Guinea, which stretches along the coasts of a dozen countries from Guinea to Angola, has escalated from low-level armed robberies to hijackings, cargo thefts and large-scale robberies over the past eight months, according to the Denmark-based security firm Risk Intelligence.

Nigeria, Benin and nearby waters were this month listed in the same risk category as Somalia by the London-based insurers Lloyd’s Market Association. Neil Smith, its head of underwriting, said: “It’s always been a concern for the shipping industry. The model that’s taken root in Somalia might spread to other areas.”

But how much economic impact are Somali pirates actually having?  Well here, from the “Information Dissemination” blog are excepts from a speech by someone in the shipping business who obviously knows a lot about such things:

[I was sent a copy of remarks made by Stephen M. Carmel, Senior Vice President of Maersk Line, Limited given August 3rd, 2011 at the Commander Second Fleet Intelligence Symposium. After reading these remarks, I emailed Steve and publish them here with his permission.   These are his personal views and not those of Maersk Line Limited, nor those of the very diverse shipping industry.]

So, there are lots of things I worry about and lots of things that impose costs on our business that I’d rather not have to deal with; piracy is one, but not the only one and certainly not the worst. On any one of them if we can get someone to provide some relief, that’s great, including piracy. But piracy is not some existential threat to this country, or the maritime industry. That has, and is, my central massage when thinking about piracy. We must keep it in perspective. Piracy today is not remotely as bad as it was during the days of the Barbary Pirates to which it is usually and foolishly compared. Piracy then represented a true threat to the security of a young US. Today piracy has zero direct effect on our economy and I have yet to hear anyone articulate anything approaching a valid national interest that justifies the costs, and risks to US lives, of that mission beyond that it is the traditional role of the US to ensure stability in the global regime from which the US benefits in an overall way. In fact piracy has had no real impact on international trade.

Traffic through the Suez Canal is near record levels according to data from the Suez Canal Authority, global supply chains through that region remain intact and we are not diverting around Africa to avoid pirates, although when bunkers are cheap enough we’ll do it to avoid Suez Canal Tolls, since below about $300/Ton going around Africa is actually cheaper and now that we’re all slow steaming time is less of an issue. Charging around at 24 knots on our big containerships is largely a thing of the past, and sadly so are $300/ton bunkers.

It is interesting to note that the US government, in the form of the Maritime Administration is itself a source of incorrect information regarding the diversion bit, which is important as virtually every “cost of piracy” calculation relies heavily on some assumed diversion inefficiency to have any level of a “wow factor” attached to it. I can tell you that Maersk, the largest container company in the world, does not divert around Africa and I don’t know of any major carrier that does. Anyway – the Maritime Administration has on their web site a cost of piracy point paper which is again reliant on diversion for its major impact. They reference the cost of diverting a 300k ton tanker as one example, but the only problem there is of course a 300k ton tanker can’t get thru the Suez so would always go around the cape anyway so the real cost of diversion is zero, and we’ll come back to tankers in a minute. They also talk about the cost of diverting containerships. When pressed for data on how many containerships are actually making such a diversion they are silent – don’t even answer me. So, take that sort or argument with a bulker load of salt and even the US government itself contributes to the voluminous amount of misleading to patently false information floating around about that.

Unfortunately for us freight rates on the Asia / Europe trade route – the only international route directly impacted by piracy, are not where we’d like them to be due to over capacity and weakening demand, so it is nonsense so say consumers are paying increased costs due to piracy. Shipping companies, in the face of weak fundamentals search for any mechanism to extract an extra nickel out of customers, including things like bunker adjustment factors and now piracy surcharges – which thanks to frothy news headlines shippers “understand”, but in the end it is the total cost of shipping a box that counts and that is not going up.

And in fact is down considerably from the peak in 2006 just before the financial collapse. More to the point, the routine peak-season surcharge that would normally be applied to that route this time of year has been delayed several times because peak season volumes are not materializing – an indicator of a bad Christmas retail season in the US and consequently very bad news for the US economy. So, from a system perspective, piracy is not an issue. That is an important point – we need to view the effects of piracy from a system level, but the highly emotional nature, the human drama associated with a specific piracy incident leads the general public to view it from a specific individual occurrence perspective and generalize that, rather than from a true system level perspective, a giant mismatch in perspective and effect. Piracy is a cost of business just like many other costs of business and business can manage it, just as they do the others. Piracy is a little different though because unlike emissions targets or bunker prices, piracy gets the general public excited, provides politicians a risk free platform for pontificating, all of which provides some of our industry an opportunity to burden shift rather than take responsible measures to protect their ships.

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