Developments in the safety of bulk vessels

Maritime leaders want firmer international against pirates before the costs of piracy become institutionalized, a status quo which would have long-term implications for the bulk carrier industry’s cost profile and the future design of vessels, writes Michael King.
The scourge of piracy has become a major drain on the shipping industry and the consumers it serves. It is also affecting the bulk carrier industry in surprising and damaging ways, heaping further pressure on a sector already coping with bottom-feeding rates and bearish commodity prices.
According to the International Maritime Bureau there have been over 200 pirate attacks worldwide this year and 21 vessel hijackings. While attacks in West Africa have increased and the Malacca Straits region remains a problem area, pirates based in Somalia are still by far the most potent threat to international trade.
Merchant ships are now being attacked deep into the Indian Ocean up to 1,750 miles off the Somali coast by pirates using mother ships — usually hijacked fishing vessels — to launch skiffs manned by heavily armed gunmen. So far this year Somali pirates have been responsible for over 70 incidents, have taken 212 hostages and hijacked 13 vessels.
As of 16 August, 11 vessels and 188 people were being held hostage by Somali pirates, according to the latest figures from the International Maritime Bureau’s Piracy Reporting Centre.
Typical of the type of incident to which crew and ships are exposed was the case of the Turkish bulk carrier Namrun. The vessel was attacked by seven pirates manning a skiff in the Arabian Sea in late June 110 miles north of Socotra while en route to Greece. The pirates were heavily armoured with RPGs (rocket-propelled grenades), grenades and machine guns and opened fire on the vessel. Armed private guards onboard the Namrun returned fire and sent an alert to military vessels in the vicinity. The arrival on the scene of the Dutch navy eventually saw three pirates killed and a number of arrests.
No crew were injured on this occasion but the threat to seafarers transiting shipping lanes over large swathes of ocean is clear and present. Since 2007 over 3,500 have been held captive by pirates operating out of Somalia and 62 have lost their lives. Many are beaten and tortured while in captivity awaiting ransoms to be paid.
Yatin Gangla, chief operating officer of Thome Ship Management’s bulk carrier division, said that each time a vessel prepares to enter an area of known piracy threat a full risk assessment must be conducted taking in everything from weather and sea conditions, through vessel condition and the optimal speed required to discourage attacks.
“We also look at placing guards and many owners do engage them,” he said. “If they don’t then we take the best possible route, we hug the coastline, we track the vessel, stay with naval convoys, and we also track known pirate mother vessels.
“The crew is kept informed of all this information and they also carry out anti-piracy drills so they are totally prepared.”
The passage through a piracy area usually involves increasing vessel speed, which Gangla said pushed up operating costs. “We have to decide if the higher bunker cost will be cheaper than employing guards and taking other protective measures. Insurance costs are also a burden.
“Bulkers have a lower freeboard than container ships and lower speeds so they are usually a higher risk.”
A recent report titled ‘The Economic Cost of Somali Piracy 2011’ by Oceans Beyond Piracy (OBP), a programme run by the One Earth Future Foundation, found that Somali-based piracy cost the maritime sector between $6.6 and $6.9 billion in 2011. Of this total the $160 million collected by pirates as ransom payments represented just 2%, with the vast majority spent on deterring pirate attacks — safeguarding vessels, their crew and cargo.
"The report assesses nine different direct cost factors specifically focused on the economic impact of Somali piracy," explainedAnnaBowden,the authoroftheOBPreport,"Over the past year we have had substantial cooperation from maritime stakeholders which has helped to ensure the figures are as reliable as possible."
The breakdown of the most notable costs incurred by the maritime sector in 2011 included $2.7 billion in fuel costs associated with increased speeds of vessels transiting through high risk areas, $1.3 billion for military operations, and $1.1 billion for security equipment and armed guards. $635 million was also attributed to insurance, $486 to $680 million was spent on re-routing vessels along the western coast of India, and $195 million was the estimated cost for increased labour costs and danger pay for seafarers.
Almost all of the costs associated with piracy are recurring, that is, they are repeated each year or each journey through a risk area.With no resolution, piracy will in effect become a new long-term overhead for shipping and trade.
There are also signs piracy risk reduction is also being factored into how some bulk cargoes are shipped, and how bulk carriers are designed.
Eirik Hooper, Director of Competitive Intelligence at port operator DP World, said the perceived security of container shipping in comparison to bulk vessels, which usually have a low freeboard and are easier to board, had led to a “significant shift” of cargo between the sector. “The shift towards containerized transport has increased the transport cost per tonne for many basic imported commodities such as sugar, cement and fertilizers,” he said.
Strikingly, the containerization of some cargoes traditionally shipped as bulk has been gathering speed despite the fact that one study estimates that the excess premium on cargo transiting piracy regions has increased by between $25 and $100 per container in the past few years.
Hooper warned there was now a risk that short-term strategies adopted to mitigate the risks of piracy, such as the use of citadels — a stronghold on the vessel where crew can seek shelter during a battle — and higher steaming speeds were becoming more firmly accepted across the shipping industry and had begun to impact some longer-term decisions.
“Citadels and other vessel hardening options are being incorporated into new vessel designs, especially in the bulk and
tanker markets,” he added. He said that each vessel
transit through waters where pirates are active now costs on average $125,000. “Whilst hidden within the cost structures of most of the shipping lines, these additional costs and inefficiencies will yet be passed onto consumers in import markets, and are in real danger of becoming institutionalized,” he explained.
“Overall, the shipping industry is very concerned that, without
some specific trigger to push for more forceful action to limit the pirates’ activities, the current situation has become a new status quo.”
OBP said the sums spent on prevention were in sharp contrast to the paltry $38 million spent last year on prosecution, imprisonment, and building regional and Somali capacity to fight piracy.
“Average ransoms increased 25% from approximately $4 million in 2010 to $5 million in 2011,” said OBP. “Although the total cost for ransoms was $160 million for 2011, money collected by pirates represents a mere 2% of the total economic cost. While ransoms provide the incentive for Somali pirates to attack vessels and hold hostages, they represent a disproportionately small cost compared to the nearly $7 billion spent to thwart these attacks.”
Speaking at a recent conference, DP World Chairman, Sultan Ahmed Bin Sulayem, said the long-term economic consequences of piracy on trade could not be over-stated. He called for more unified action to combat the problem before piracy became accepted as a normal transaction cost of business.
“The macroeconomic impact on countries of the region and beyond will have long term negative consequences if this menace is left unchecked,” he said, adding that the cost of piracy to the international community was now one billion dollars more than Somalia’s entire GDP.
“For the fifth year running the busiest sea-borne trade route in the world, the Gulf of Aden and the western Indian Ocean region, continues to be held to ransom by a relatively small but aggressive group of pirates.”
“Maritime piracy is as old as maritime trade itself, and yet we have not been able to eradicate it. Indeed, with the ransom taking that has come to dominate modern piracy over the past five years, piracy has a new and even more sinister face.”
Comprehensive, sustainable solutions to maritime piracy had still not been achieved despite an increased military presence, better monitoring of suspected pirate motherships and better information sharing on key trade lanes, said Sulayem.
He called for a “higher level of collaboration” between all parties to further improve the anti-piracy effort.
“The fact is that attacks by pirates not just endanger the lives of hundreds of seafarers and disrupt vital economic activities, they also undermine efforts to restore prosperity and stability to Somalia.
“Piracy’s destabilizing impact can only be mitigated through collaboration across political, military, financial and legal arenas.