Booming Asian demand for South African coal will put more ships at risk from Somali pirates operating in the Indian Ocean and raise insurance and freight costs already hiked due to seaborne attacks.
Emboldened by rising ransom payments, Somali pirates have stepped up attacks in recent months, making tens of millions of dollars by hijacking ships in the Indian Ocean and the Gulf of Aden.
While pirates have hijacked oil tankers, passenger ships and yachts, they have started to target slow moving coal bulk carriers, which are easier to overcome than a large tanker.
A Somali pirate who gave his name only as Hassan told Reuters that armed gangs can operate far out to sea and were able to dodge naval warships deployed to combat their activities.
“If there are more coal ships coming, it is good news,” said Hassan, who was involved in a coal vessel hijacking last year. “A bulk ship means bulk ransom.”
Last October, a Chinese coal ship headed for Indian trader Adani’s Mundra port was hijacked and ransomed for $4 million.
“Piracy is becoming a real headache and it’s going to get much worse as more coal leaves South Africa for India, China and elsewhere in Asia,” one South African shipping source said.
“It is definitely costing people more money in insurance, in fuel, in security measures.”
Asia, led by India and China, could take 75 % of South Africa’s 65 million tonnes of thermal coal exports in 2010 as demand shifts from glutted Europe, putting many more ships in the gun sights of Somali pirates, analysts said.
Companies involved in this seaborne coal trade said they have already had to swallow higher costs due to taking longer routes to avoid pirate hotspots and insurance premiums.
A senior shipper said piracy risk cover on a voyage from South Africa to India added $30 000 on top of the basic insurance cost. A further $40 000 to $50 000 had to be added for longer diversions aimed at avoiding pirates.
J. Peter Pham, an African security adviser to US and European governments and private companies, said dry bulk ships carry commodities such as coal, iron ore and grains, were vulnerable partly due to their slow speed and older age.
“When they are fully loaded with their cargo they tend to have a low freeboard (the distance between a ship’s railings and the water) so they are easier as targets to attack even when they are moving,” he said.
“If you are moving more coal in these types of carriers, it is fairly reasonable to say you are probably going to get more attacks on them.”
Global pirate attacks on dry bulk carriers hit their highest last year since 2003 with 109 ships targeted, data from the International Maritime Bureau watchdog showed.
Foreign navies have been deployed off the Gulf of Aden since the start of 2009 and have operated convoys, as well as setting up a transit corridor across dangerous waters.
But their forces have been stretched over the vast expanses of water including the Indian Ocean, leaving merchant vessels vulnerable.
Pirates typically use mother ships to sail hundreds of miles to sea and then attack in small skiffs, turning the Indian Ocean into a major risk.
“It is a massive area and there are just not the warships to patrol it,” said Peter Hinchliffe, marine director with the International Chamber of Shipping (ICS), which represents 75 percent of the global shipping industry.
Hinchliffe said it was vital to ensure the “free and unhindered passage of world trade by sea”, urging the targeting of mother ships.
“We are seeing governments effectively not doing much more than putting a sticking plaster over the problem,” he said.
With Somali pirates increasingly firing rocket propelled grenades to force vessels to stop, coal ships face other perils.
John Dalby, chief executive of MRM, which provides armed and unarmed personnel to merchant vessels in the region, said coal was as dangerous to transport as petroleum cargoes.
Coal gives off toxic gases in a sealed cargo hold which would ignite and explode if a ship was fired upon.
“Crews should consider themselves to be on a similar level of risk as on a tanker,” Dalby said.
Some of India’s biggest coal traders said they doubted much could be done to combat piracy.
“We haven’t been affected so far, perhaps we’ve just been lucky,” one major coal trader said.
Pic: Cargo Ship