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.