Back to piracy

The recent series of pirate attacks of the Somali coast have brought the issue to the forefront again. It is not surprising: after months of relative quiet, it is now rare for a day to go by without reports of yet another hijacking attempt, successful or not.
Military patrols of the admittedly pretty large patch of sea the pirates hunt for their victims in had been credited with the lull; unfortunately, this seems to have been misplaced. The weather, it seems, had more to do with it. And this should come as no surprise.
There are some 16 warships patrolling the shipping lanes off Somalia. But note: they come from 10 or more countries, there is only minimal coordination between them, and they are trying to defend against small boats in a vast area. A military solution, clearly, can’t do the trick on its own.
There is another problem here. Piracy is a crime. Dealing with it is police work, not a military operation. This is not a war. And this is not, very definitely, terrorism. Crews may be terrorized, but that’s not the point.
Pirates are after cash. And so far, the way they’ve got it has been through ransom. This has meant that till recently, the modern Somali take on piracy has been a lot more benign than the 17th Century variant.
There have so far been no crew members killed, though some have been injured. Crews being held have reported been treated well – other than finding themselves stuck on a ship a few miles offshore, unable to go anywhere. This makes sense: you do not collect ransom on dead people.
But this seems to be changing; people have now been killed, ironically during rescue operations. The French killed pirates and one hostage when they went in to get the passengers off the yacht Tannit, and the American Navy killed three of the pirates holding the captain of the Maersk Alabama in a lifeboat.
That changes the dynamic, making for a much more dangerous situation. It may be too much to say the pirates have been co-opted into some sort of terrorist conflict, but the risk is now that they will be more violent, more willing to shed blood.


Whither shipping?

Ships avoiding the Suez Canal pose a threat to Malta’s transshipment business.

I have been told by executives in a number of shipping companies that more and more of the Asia/Europe trade is being routed round the Cape of Good Hope, taking the long route round Africa rather than the shorter Suez route. This is intriguing: it is, in effect, a reversal of all trends since Suez was reopened.
The logic for the shift is impeccable. First, piracy. Somalia has no stable government and few opportunites to earn a living: Somalis have taken to piracy in a big way in response. You can’t be surprised: ransom for a large, high profile ship can run into the millions of dollars.
Now Somalia is strategically placed: on the Horn of Africa, it dominates the approach to the Red Sea and the Suez Canal. The problem becomes clear now: if you avoid the Somali coast, then Suez is out of reach.
With high oil prices, the cost of the longer journey was prohibitive. But then oil – and with it the bunker prices for the fuel ships actually used – collapsed. The longer route now became viable.
Note that some shipping lines, in an effort to keep their ships moving with less cargo to carry, chose to slow their ships down. Longer rotations means the same number of ships carry less freight. This does not apply to the majors, as far as I know. But still.
As an executive of one shipping line told me, one of the reactions to the high cost of fuel was to slow ships down. The trend had been to get freighters (for which read bulk carriers, container vessels, tankers, et cetera) to move faster and faster. But a lot of cargo is not necessarily time sensitive: slow it down, you make considerable savings on fuel and many of the shipping industry’s clients proved willing to wait if it saved them money.
Piracy is now being tackled, with military escorts through a corridor in the straits between Yemen and Somalia and patrols in the western reaches of the Indian Ocean. As events over the past few days have shown, this has not stopped it. Piracy is still a threat, but not as much as it used to be.
The second reason is stranger. I have been told by shipping executives in Malta that the transit rates through the Suez have been raised. This, they say, is driving ships away and onto the long, circumafrican route.
It would, I suppose. There is one problem: I can find no reference to this on the Suez Canal Authority’s website, and have as yet had no answer to an email to them. There is, of course, the statement the Authority made, committing itself to not raising rates this year.
The truth remains that traffic through the canal has dropped, and the main reason for that is not piracy or the price of oil, or even the rates: there is simply less trade to go round!
However this plays out, though, less traffic through the Suez is bad news for Malta. We live on trade, and have leveraged our position – astride the main shipping lanes from Suez to Gibraltar – to establish a tidy transshipment business. But if the main East-West lines start bypassing the Med, that is at risk. And with it, the favourable rates Maltese importers and exporters obtained by piggybacking on this high-volume traffic.

Going private

There are, we have been told, 14 bids for various parts of Malta Shipyards. None, however, for the whole business. It seems that no-one sees the value of keeping the parts together.

A pity, really: the yacht yard and the superyacht facility both benefit from the availability of full shipyard facilities and skills within the same organisation. But the value remains. Trade will need to continue, and seabourbe trade, the most efficient way to move goods about on a cost per tonne basis as well as the most environmentally friendly mode of transport, will recover.

Remember, even new ships have accidents, and to remain efficient need maintennance. What the Maltese shipyards need to do, under any regime, is market effectively and stay competitive. Price is going to be a big issue!

The shipyards, properly run, should be a goldmine. Let’s hope they fulfil their promise! Oh yes, and that the people with the all-important skills are still around when we need them.

Malta has had ship repair facilities for hundreds of years. Without gojng back to classical times – the Romans had harbours on the island, so presumably they also had the means to build and repair ships. But from the Middle Ages on, there has been a shipyard at more or less the same place in te Grand Harbour.

This makes sense: Malta is a trading nation and has been from time immemorial. Malta’s fabled “strategic position” has worked to its advantage in trade as well as in military terms.

Malta is ideally placed for trade around the Mediterranean. Right there in the center, it is very close to the main east-west shipping lane between Suez and Gibraltar – which means a lot of traffic goes past every day. Remember, the Mediterranean is a major shipping route, with a lot of traffic just transiting en route from Asia to Northern Europe or the States.

Then there is the intra-Mediterranean trade. And there is a lot of it. The easiest way to service any port around the Med is from Malta’s ports – it’s in the middle of a long, relatively narrow sea. It may be a shorter distance from one western Med port to another – but a really long way to the eastern ports. But from Malta, they are all reachable.

All these ships need maintennance, need repairs, even refits. And this is the logic behind Malta Shipyards and whoever takes over once the privatisation process is completed. And mind, the economic crisis does not really affect this.

Yes, ships – especially bulk carriers – are being laid up. Trade is down. But don’t be fooled. It will not stop, not by a long shot.