Piracy Spurs Threats to Shipping Costs

The seizure by pirates of a giant Saudi oil tanker far off the coast of Kenya could enlarge the “war risk” zone that already is lifting insurance costs for thousands of ships heading west of Africa, further raising the cost of piracy to world-wide shipping.

More vessels have begun avoiding the direct passage most often attacked by pirates and taking a much longer route around the southern tip of Africa. They’re hoping to pressure governments along the direct route, through the busy Gulf of Aden, to crack down more effectively on piracy or lose revenues from cargo-ship traffic.

By John W. Miller
The Wall Street Journal

But the unprecedented attack disclosed Monday on the MV Sirius Star, carrying $100 million worth of crude hundreds of miles from shore in the Indian Ocean, is undercutting that strategy. It could raise the cost of insurance and crews for ships that take the longer route, which already costs far more in fuel.

The boldness of the attack on the 1,080-foot Sirius Star may prompt insurers to require special “war risk” insurance costing tens of thousands of dollars a day to cover travel across a much greater area of water. It also could spur shippers to hire more onboard security for their vessels, which many have resisted because of costs and the fear of escalating armed conflicts with the pirates.

“This could be a game-changer,” says Peter Hinchliffe, maritime director of the London-based International Chamber of Shipping. “It’s no secret the whole industry is looking into this.”

Governments and shippers have sparred over who should bear responsibility for fending off the pirates, who seized 26 ships in the region during the summer alone and have collected up to $30 million in ransom so far this year, according to the International Maritime Bureau.

Read the rest:
http://online.wsj.com/article/SB122701864743437147.html

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