Lull in piracy yet to see drop in shipping fees
Wednesday, August 14, 2013
Falling pirate attacks off the coast of Somalia are yet to
translate into lower shipping costs as companies continue to pay heavily
to keep the bandits at bay.
Data from the International Marine Bureau (IMB)
indicates that increased policing of the Indian Ocean and the Gulf of
Aden has seen piracy decline to a seven-year low in the first six months
IMB reports that there were nine piracy incidents
along the Gulf of Aden in the first half of the year, a sharp drop from
the 69 attacks during a similar period last year.
Worldwide, the bureau recorded 138 piracy incidents against the 177 reported in the first half of 2012.
“IMB attributes this significant drop in the
frequency and range of attacks by Somali pirates to actions taken by
international navies as well as preventive measures by merchant
vessels,” said the bureau in a July 2013 statement.
Despite this positive trend, industry players who
spoke to Smart Company said the benefits of falling piracy rates were
yet to trickle down to traders on the ground.
Reducing attacks have been directly correlated
with increased spending on security. Governments and shipping companies
continue to incur heavy costs in protecting vessels from raids.
“The problem is that the threat is still there and
the shipping lines do not want to take a chance. They are still levying
surcharges on freight rates to cater for security,” said Kenya Ships
Agents Association (KSAA) chief executive, Mr Juma Tellah.
According to a report by Oceans Beyond Piracy, a
project of the One Earth Future Foundation, Somali bandits cost the
world economy Sh2.3 trillion ($6.1 billion) in 2012, a 12.6 per cent
drop from the figures reported in 2011.
Despite this overall drop, Oceans Beyond Piracy
argues that the cost of Somali piracy to individual shipping lines and
traders actually rose during the period.
“The number of attempts and hijacking fell much more drastically than the cost of combating piracy,” it said.
The cost of piracy per incident rose by 189 per
cent between 2011 and 2012 from Sh2.5 billion ($28.6 million) to Sh7.2
billion ($82.7 million). The highest increase was associated with armed
While 30 per cent of all vessels traversing the
Gulf of Aden paid for armed guards in 2011 at a combined cost of Sh46.2
billion, the rate rose to 50 per cent in 2012 at a combined cost of
about Sh133.1 billion.
The trend now seems to have been transmitted to
2013. A July 2013 report in the Business Daily noted that foreign
security firms have opened offices in Mombasa and Mauritius, tapping
into a thriving business occasioned by the need for armed guards for
ships traversing the Gulf of Aden. A guard can cost as much as Sh2.15
million ($25,000) for a transit voyage through the Gulf of Aden.
“Vigilance cannot be abandoned just because piracy
seems to have fallen. Companies still think that anything can happen.
The pirates can adapt and change their modus operandi. This is why
security costs are still high,” said the Seafarers Union of Kenya (SUK)
secretary general, Mr Andrew Mwangura.
In addition to spending heavily on security,
Oceans Beyond Piracy also notes that shipping companies are facing high
labour costs. According to agreements signed between ship owners and the
International Transport Workers’ Federation (ITF), workers on ships are
paid a bonus equal to 100 per cent of their basic wage during a ship’s
stay in high-risk areas such as the Gulf of Aden.
The Philippines government said its citizens on
contract with shipping companies should earn 200 per cent wages while
transiting the high-risk area. Filipinos comprise about 18 per cent of
the world’s seafarers.