One problem is that doing things properly, according to rules laid down in the best of times, are ill suited to dealing with problems in the worst of times. Cheap solutions have become illegal and legal solutions, prohibitively expensive.
Cost is the be-all and end-all in shipping. What's more, bringing costs down is precisely what has brought about our better world, and increasing them will plunge us back into global poverty whence we came.
But the affluent of the world do not see the positive developments as readily as the negative. Thus, they see little need to take harsh measures to defeat an enemy that threatens precious opportunities because they cannot see the advances that have been made.
Nonetheless, the world's poor are emerging from the grinding poverty of yesteryear, largely because shipping technology allows them to sell goods they produce in volumes that make a difference. But the media, bathed in conspicuous compassion, still stress the poverty that remains without acknowledging gains made.
What is important to understand is the delicate economic balance achieved by global shipping and how easily it is to upset it. But let's go back. In the early 1970s, freighters were mostly leftover World War II Liberty Ships. At the time, 50 per cent of the price of imported goods was taken up in shipping costs. A Liberty ship with its crew of 40 carried some 250 TEU of cargo in today's terms. (TEU, a 20-foot equivalent unit, the length of older standard container, and often used to indicate vessel size.)
The first containership sailing to North America from England arrived 1969 and carried 500 TEU. Today, Denmark's Maersk Line, the world's biggest, has 18,000-TEU ships on order and 13,000-TEUers are becoming commonplace, each with crews of 25. Thus, the cargo held in 52 Liberty Ships could fit into a single big containership today. Put another way, a crew of 2,080 would be needed to move the cargo held by a single 13,000-TEU ship if it were loaded into what would be a fleet of Liberty Ships - about the size of an entire wartime North Atlantic convoy, typically 30 to 70 cargo ships.
It was this larger scale that brought down costs, and lowered prices of retail goods worldwide. Technological change also played a part. No longer did gangs of longshoremen work an old Liberty Ship with bailing hooks, cargo nets hoisted by dinky derricks. No longer did they move cargo at 20 tons an hour. With containerships, and accompanying gantry cranes, they moved cargo at 20 tons every three minutes. Pilferage virtually disappeared because the cargo was in sealed containers, and costs came down again. Ships no longer spent two to three weeks in port; they were in and out in half a day.
This enormous impact on costs meant more working people in rich countries could buy imports. The more they bought, the more goods were made, and the bigger the factories became, and the bigger the ships grew. The growth made goods still cheaper. This in turn meant more money going to back to people in poorer countries, who made more goods more cheaply for more people everywhere.
But if piracy makes this process too expensive to maintain, then the economics sustaining this virtuous circle will end and reverse itself. For instance, piracy has undermined slow steaming as the current cost cutter by making the once invulnerable containerships easier prey for pirates.
Mostly, pirates attack low and slow bulkers and tankers moving at 10-12 knots. Containerships cruise at 22 knots, but it is much cheaper if they move at half that speed. Not half as cheap, but three quarters as cheap, because faster speeds result in a disproportionately high fuel burn because much more energy is needed to propel massive ships at higher speeds. And with fuel costs coming to 60 per cent of operational costs, that's important.
At 22-knots, box ships were too fast for pirates with their high freeboard, throwing up enough wash to make boarding nearly impossible. Having stacks of containers on deck didn't give pirates much to shoot at when aiming for the bridge. But if the containerships were to make themselves safe again by accelerating, they would erase cost savings brought about by slow steaming.
On one level, piracy is still a mere nuisance going by the numbers. There are 20,000 ships that transit the Suez Canal annually, but only something like .001 per cent are successfully hijacked. At the same time, ransoms averaged US$1 million six years ago, but the last one paid was reportedly $7 million. More recently, pirates started off the bidding at $15 million in one current case that is still in negotiation.
Industry and government condemned arming crews outright, though it had backing from US Army General David Petraeus. It is clearly the cheapest way, but is fraught with legal problems and concerns about accidents.
The nature of shipping has also changed. It has become a much less a manly occupation, and sea captains have more in common with middle managers of 25-employee departments absolute rulers of all they survey on the high seas. So arming crews struck the modern industry as preposterous as arming the employees at McDonalds to repel armed robbers.
Having professional armed guards was also discouraged at first by the industry and governments, mostly because of a European reluctance to allow guns in civilian hands. But the option has been reluctantly approved by the UN's International Maritime Organisation earlier this year, and more recently by the British government.
Deploying naval forces has proven only slightly effective and hugely expensive and increasingly wearing on financially hard-pressed developed countries, which must denude their own shores of already minimal maritime cover to go east of Suez to burn costly fuel and have the air-con blasting 24/7. Sailors, many of them women, also need home leave every few months, so there is a costly stream of personnel and supplies to-ing and fro-ing from home countries to the Indian Ocean. While the navies have done good work, they have not suppressed piracy, nor do they expect to, given the vastness of the ocean, dissent in their own ranks and their varied rules of engagement.
Even within NAVFOR, the EU flotilla, each country has its own rules. The Germans, for instance, will not fire unless fired upon. So if pirates flee, they can follow but not shoot. Earlier this year, a Finnish warship part of NAVFOR caught 18 pirates attacking a ship, but the country was unwilling to prosecute, so let them go.
Anti-piracy surcharges on cargo, running to $250 per TEU, or $250,000 per 10,000-TEU ship. Costs of armed guards sailing five to six days between Sri Lanka and the Red Sea run to $250,000 per voyage. And one can expect naval forces to start charging user fees to maintain whatever level of security for which the industry is prepared to pay.
The real risk ahead is that it will soon come to a point where goods can no longer sell at the higher prices that must be imposed to cover the increased costs of getting them there. Once this point is reached, that promising virtuous circle of economic growth we have enjoyed in the last decade will end, and even reverse itself to the detriment of all.
There are ways of dealing with the problem, but they are not a regulator's dream. Arming crews risk accidents, risk killing fisherman, or crewmen killing each other. While these possible costs are stressed, little attention is given to the inevitable cost imposed of every single one of the 20,000 ships transiting Suez annually, equipping itself with all the bells and whistles mandated by "best practice" and how much this cost will be added to the product on the retail shelf.
It is time impose rational risk assessment and consider adopting more do-it-yourself solutions that have worked before - perhaps 100 years before - rather than continue with expensive measures that have not worked, and cannot work unless applied at a vastly more expensive and ultimately ruinous extent.
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Author Resource:- Christy McCormick, editor of the Hong Kong Shipping Gazette, http://www.shippingazette.com reviews the effects of piracy at sea on container shipping off the Horn of Africa, the impact of armed guards and naval forces on slow steaming and the advances in shipping technology which make the world a better place for rich and poor alike.
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