February 23, 2012

Somali piracy: Whole lotta shakedown going on

graphic, source- Ocean's Beyond Piracy

We ain't fakin'
Whole lotta shakin' goin' on
                                              -Jerry Lee Lewis

Denuded statistics from the Ocean's Beyond Piracy published last week prove to me once again how Western nations have deluded everybody and conspired to make billions annually from Somali piracy- while the pirates have made peanuts in comparison. Indeed, these nations have gone one up on Somali pirates- they don't hijack one or two ships; they hijack the entire industry instead, and they do it legally. 

What is even more frightening to a sailor is that the same game will be played elsewhere in the world. It is already being played in Nigeria, where a Taiwanese Captain and a Chief Engineer were shot dead by pirates last week when their ship was attacked. It will be played again and again, as criminals are encouraged across the world after the realisation that the powerful in the international community are party to their plunder, torture and murder, not a deterrent against it. 

The OBP figures are stark and tell their own story.  The number of pirate attacks has decreased, as we all know, but the cost of piracy is still around 7 billion dollars annually- the same as in 2010. Last year, the shipping industry spent all of 2.7 billion US smackeroos because of increased fuel consumption as ships- mainly container ships- ran hell for leather across pirate zones. More than a billion was spent additionally on private guards. The total pirate ransoms for last year were just 160 million US dollars, which makes it clear that "private security companies, many based in Britain or elsewhere in northern Europe that combat the pirates, were earning much more than the pirates themselves". That quote is from Reuters, but anybody can do the math.  

And oh, governments are spending $1.3 billion annually on their navies that patrol the region, although I am unclear how much of this cost should be allocated to anti-piracy and how much should be chalked up against the sabre rattling and geopolitical ambitions of some of these nations. Other large chunks of costs: insurance ($635 million, much of it paid again to the West), re-routing vessels (up to $680 million) and “danger pay” for sailors ($195 million). 

The bottom line is that pirates are making just two percent of the total money being spent on piracy. The rest is due to higher insurance premiums, security and other anti-piracy costs that remain unchanged whether ships are hijacked or not, OBP says, its lead author Anna Bowden pointing out that, “the costs of preventing piracy are indeed disproportionately high. It is also a concern that 99% of these costs are recurring costs. There needs to be a reassessment of the long-term sustainability of these costs.” 

Rather politely, I thought, pirate expert Jan Stockbruegger later told The Media Line, “Pirates earn $160 million per year, while the cost for insurance is four or five times higher. You could argue that insurance companies make more money from piracy than the pirates themselves.”  The same argument, as said, applies to private security companies.

To get some other stats out of the way: The number of Somali attacks actually increased to 237 in 2011 against 219 in 2010, although the number of ships hijacked fell from 49 to 28, thanks to armed guards. These numbers have to be taken with a pinch of salt, because many attacks remain unreported. However, average ransoms have shot up by 25 percent. Worse, the average time hostage sailors spent under pirate control increased dramatically- to 178 days, more than half a year. Moreover, “a worrying development in the ransom business model,” OBP says, is that pirates have begun to focus their attention on people rather than ships. We know that already; we have all heard the reports of torture, killings and the transfer of crews off ships and onto land, as pirates get increasingly violent.

You know, while I have been writing for a very long time about this criminal behaviour of mainly Western companies, backed by their governments and lackey international organisations, I have erred in assuming that at least some of their impotence in the response to piracy was because of inefficiency or ineptitude. 

Look at the evidence.  Some of us were screaming for years that armed guards were the only solution; it was only when things escalated out of control, that guards were allowed or even promoted by the same countries, the IMO or insurance companies that are all based in the West. Meanwhile everybody made a fortune.

Some of us were screaming for years about the links between Al Qaeda, Al Shabaab and piracy- an accepted fact today, as drone attacks and the invasion of Somalia by half a dozen countries shows. These links were not acknowledged, because it would have meant that no ransoms could be paid in countries like the UK and other action would have to be taken, all of which would have derailed the gravy train in the West. It took the kidnapping of a couple of western tourists from a Kenyan resort into Somalia for these links to be publicly acknowledged, although quietly even today, to ensure that the gravy train chugs along.

As things stand, the struggling shipping industry will continue to pay billions of dollars annually through its nose to the same companies and countries in the West. Very little of this will be for ransom; 98 percent will go into Western pockets.  Our screaming will be conveniently ignored -although, hypocritically, the West will continue to express concern about piracy and the abuse or killing of mainly third world sailors. 

They will be faking, of course.  Because the truth is that they love piracy. The truth is- sorry, Jerry Lee Lewis- that there is a whole lotta shakedown going on. 

Infographics  http://www.backgroundcheck.org/cost-of-piracy/


February 16, 2012

Indian ports and the new Supreme Court risk

Consumed by the Indian Supreme Court's ruling on the telecom scandal and its aftermath, what passes for the media in this country has ignored the recommendations of the same court's Central Empowered Committee (CEC) that were made public almost concurrently. If  accepted, the recommendations of the panel- set up to probe illegal mining that, combined with the disgraceful chicanery associated with 'legal' mining, make even the astronomical figures associated with the telecom scam pale in comparison- will have a immense negative impact on the shipping and port sectors. Not just profitability, but the viability of some ports may end up being called into question. 

While asking for the suspension of 49 iron ore miners from Karnataka and saying that 72 others should be severely fined, the CEC has asked that the annual production from that State be capped at 30 million tonnes. The language of the report is indicting. “The extent and level of unauthorised, unregulated, environmentally unsustainable and illegal mining in its various facets has no other parallel in the country,” the CEC is quoted as saying. 

It is not just the CEC; India seems to be slowly waking up to the mother of all scandals that is year's old- the fire sale of its mineral resources. Except that most of the proceeds of the sale go into the usual private and public pockets (in partnership, of course), with the country itself getting next to zilch. This is the second East India Company.

 Orissa has, in recent times after a mini crackdown, barred its ore from being shipped out through Vizag and Kakinada because, according to Orissa's mines ministry, those ports failed to cooperate with inquiries into illegal mining. The Madhu Koda fraud- where the then allegedly honourable Chief Minister of Jharkhand allegedly siphoned off a fifth of that State's annual revenue- may have been buried by you know who, but the US$12 billion Belekeri port scam thereafter has brought down a Chief Minister- and resulted in a (since lifted, although exports have not resumed) Supreme Court ban on mining from the Bellary region. Three and a half million tonnes of ore were reportedly exported without a rupee of royalty paid to the exchequer before the ban. One report said that only 200 trucks were officially reported as against 4000 plying everyday. Goa is another hotspot, with powerful people involved.

Despite its huge internal steel demand, most of India's iron ore has been-legally and illegally- exported to China through ports like Paradip, Haldia, Vizag, Kakinada and Gangavaram. Two of these are now blacklisted; Paradip saw a halving in the number of rakes coming in after the Orissa crackdown began. However, the economic threat to these ports is not just because of central and State agencies being forced to take action after the spotlight has shone on illegal mining. It is not just, as we will see, a problem of reducing cargo volumes that will threaten ports. 

The fact is that the list of companies involved in mining are established leaders of the corporate world. Indian companies- including Tata Steel, Essar and Larsen and Toubro- are major participants in mining or ports in the region. Mining companies are going to see their profitability badly hit, should the CEC's recommendations be accepted. NMDC, the country's largest iron ore producer, and JSW will pay a higher price for iron ore. (NMDC would also lose 10% of its revenue to an infrastructure development fund recommended by the CEC). Sesa Goa's plans to enhance capacity in Chitradurga would grind to a halt. Mysore Minerals and MSPL would have to shut down a mine each. Some smaller companies may have to quit completely.  "Mining could well see negative growth of 2.2% versus 5%,'' says commodities analyst Santosh Bagchi.

Supreme Court committee recommendations are important, but it would naive- even foolish- to see the system's response to corruption as the only threat to the ports in the region. The fact is that the human cost of the corruption in mining is massive in terms of the torture, rape and widespread oppression of local villagers and tribals in states like Chattisgarah, Jharkhand and Orissa. The fact is also that mining companies and those pillars-of-the- corporate world are paying extortion (up to 5 percent of revenues in case of illegal mining) to 'Naxalites' for the privilege of operating in these areas today. The fact is that one can superimpose a map of India's mining districts onto a map of naxalite areas and find complete coincidence. A third of Indian districts are naxalite affected. Many of those districts are powder kegs with a lit fuse; how long before they explode? How long before horrendous tales of the custodial sexual torture of the Soni Sori's- and her cold-blooded abuse by the system in Delhi that sent her back to her torturers while awarding one of them a gallantry award- results in a conflagration that will pose an existential threat to mining? How long will ports- especially on the east coast- escape the financial and security backlash, should this happen? 

Interestingly, just a few days after the CEC report, Shipping Minister Vasan announced his firm commitment to the Public Private Partnership model for port development. According to him, "it is necessary to increase the overall capacity of Indian ports to 3,230 million tonnes by 2020 from the current 963 million tonnes".  The Government of India is planning to encourage private investment in the port sector. All kinds of sops and tax holidays will be rolled out to promote that PPP, I am told.

The threat of civil unrest is an old one. However, I am afraid that until the existing PPP is dissolved- the one that the bureaucrats and politicians have going on with mining companies across India- I won't be investing my hard earned seagoing wages in that sector just yet. At least not on the eastern and the southern west coasts. Mainly because it is a tinderbox waiting for a match, but also because- as we saw in the telecom scandal- there is a new risk to doing business in India: the Supreme Court risk. 


February 09, 2012

Shipping- worse than the eighties?

"D/S Norden A/S, Europe’s biggest publicly trading commodity shipping company, hired a Supramax vessel at no cost other than fuel charges, its first such transaction in a quarter century", a Bloomberg report said a week ago.

Shipping is in the midst of its own lost decade; predictions of industry recovery, which initially forecast a turnaround of sorts by the early next year, have started talking about conditions not improving until at least 2014. My own opinion is that even these analyses- God alone knows from which hat experts so confidently pull out these years- are somewhat optimistic. It seems near certain that we are heading for times that will be more scorching than the eighties recession some of us remember with a shudder.

One major difference this time around is that shipowners will find it impossible to slash costs as they did so easily then. This is an era where a shipowner cannot find competent crews easily, a time when safety cannot be compromised as easily thanks to regulatory and PSC regimes or oily water pumped overboard so dismissively. More stringent STCW and MARPOL regulations are in place. New regulations- with ballast water, for example- come with additional costs. There was negligible focus on cleaner, more expensive fuels, carbon footprints or air quality then; environmental protection was near ignored. When seafarer competence was not a big question and training costs to shipowners- but not to the sailors- were zero. When K&R insurance did not exist. When shipping finance had not constricted as much as it has today. 

All these costs have escalated- and many new ones added. Many of these are not small; most of these will only increase with time as more States take tougher steps to protect their coastlines from substandard ships, callous or greedy owners and ill trained or incompetent crews. With the inevitable advent of mammoth ships, this process will rapidly accelerate. The industry may find that- quite soon- newer heads of expenses make for a larger piece of the overall basket than some of the more traditional ones. The industry may find, for example, that it cannot get competent crews for the new generation of technologically advanced behemoths without paying through its nose. Economies of scale may not look as attractive then as they appear on paper today.

Unfortunately, higher costs are just one jaw of the pincer; an industry can survive those if there is a somewhat proportionate rise in income- or even the hope of one in the near future. The eighties recession stabilised and reversed on the back of genuine demand- and shipping is a cyclical industry anyway- friends tell me, so why am I so bearish now? 

I am long term pessimistic for many reasons. The lesser of these have to do with the weak and shortsighted structure of the industry. Put simply, shipping is not- and has never been- anything but reactive; it does not have the structure, the visionaries, the organisation or the ability to do anything but respond to present stimulus. This is a weakness that will hit us more in the future than it did in the past simply because the demands of the future will be heavier than they were, say, in the eighties. These weaknesses will be laid bare for all to see the tougher times get.

But the larger- perhaps the largest, and this is the second jaw of the pincer- reason for my pessimism is that I simply do not see demand for goods, and therefore for shipping, picking up easily. Europe will take many years before it fills up the hole it has dug itself in. The US appears somewhat better placed, having the ability to at least print more money, but the piper will have to be paid sooner rather than later. Most of the rest of the world is in a similar situation- with the possible exception of China. But then, how long can an export-dominated economy prosper if its customers are broke? How long can it afford to feed its apparent unquenchable hunger for ore, oil and other commodities when it cannot sell as much? 

I think that some sectors in shipping- bulk carriers and tankers, maybe- will do a little better than others but only if China stays buoyant. Some countries will do well if this happens too- Brazil and Australia come to mind. Unfortunately, even two or three swallows do not make a summer. Taking a broader view, I expect trade to remain sluggish for many years, or grow slowly at best. 

After a few of these, shipping would have largely dealt with -absorbed or demolished or whatever- its humungous tonnage overhang, but I am afraid that will not solve the debilitating issues that will probably still exist: stagnant or slowly growing global trade, rising operating and capital costs and an abnormally weak industry structure that does not know how to be proactive.

Those who expect a shipping recovery in 2014 may find, when they eventually get there, that 2014 makes 1983 look like 1995.

February 04, 2012

Groundhog day, again

Now that people have made millions once again on 'Project Horizon', (which was 'an 11-partner European, 32-month research study, part funded by the EU, that brought academic institutions and shipping industry organisations together, with specialist input from some world-leading transport and stress research experts' to study fatigue at sea once again), it is time for me to recall a 2009 article of mine, I think.

Here it is:
Groundhog day

Don't know about you, but these studies are so tiring. After thirty years, I wish they would do something else- anything else- than study the damn problem.



February 02, 2012

Cat vision comes to sea

It has been a long while since I have got excited about new gizmos in the wheelhouse, but the integration of thermal imagery with a conventional marine radar throws up so many interesting possibilities that I wish I am at sea when these systems become commonplace.

The five billion dollar market-cap thermal imagery company FLIR bought the well-known marine electronics outfit Raymarine in the middle of last year; the new Kelvin Hughes’ MantaDigital multifunction display seems to be the first serious result of the union. It consists of two side-by-side displays, either on two displays or a combined display on the same screen; the operator can see a conventional radar screen alongside another screen that shows an image from a thermal camera mounted on the ship. The concurrent viewing of these two can be invaluable- as every navigator knows- in poor visibility; the fact that radar targets can be matched to thermal images of the object in question in real time is what is exciting. The fact that the operator can - through the radar controls- zoom, pan and tilt the camera to follow a selected target automatically is a bonus, as is the system's ability to lock onto the range and bearing marker, zero in on a stationary target- or be manually controlled by the operator. Priceless in poor visibility- or in polar regions, a market that FLIR seems to be targeting first.

Thermal images, or thermograms, are actually visual displays of the amount of infrared energy emitted or reflected by an object. These cameras convert the infrared energy received- which all objects emit under any conditions found at sea- into a visible image. Standalone thermal cameras have been in use for a long time- in night vision goggles and in military operations, for medical purposes and medical imagery, for non destructive testing, fault finding in machinery, installations and construction and, more recently, used extensively by fire-fighters and rescue personnel who even use helmet mounted thermal cameras to locate survivors in smoke or debris.

For marine use, however, FLIR says it will manufacture long-range, gyro-stabilized, thermal imagers that provide high-resolution infrared images in daylight as well as in total darkness. FLIR is already in the market with standalone systems meant for recreational boaters, which allow easier navigation in busy waters under or at night. However, this is the first (that I know of) time that a commercial application has been developed that is integrated with the radar and- equally importantly- meant for shipping on the high seas. And, although the costs of the equipment are bound to be high, at least initially (a high quality thermal camera costs around 6000 dollars; a high quality camera meant for marine use is likely to be more expensive), what is exciting is that a third dimension to the basic 'lookout' navigation function- in addition to visual and radar 'lookout'- is on the horizon. In future, 'all available means' in the Colregs' 'Lookout' rule may well imply the inclusion of thermal imagery and its integrated systems.

Besides poor visibility situations, the new system will have many other uses. Navigation will be easier near unlit objects (including pirate boats) and in darkness, or while approaching port or berthing at night. In certain waters- polar for one, but also in much of the English Channel and North Sea in winter- plagued by persistent fog or ice, this equipment can greatly enhance operational safety and address at least some issues of fatigue and stress on the bridge; anything that lets a navigator 'see' when in dense fog will do that. 

Stirring, these possibilities, but I have some apprehensions too. The primary fear is the near-certainty that too many navigators will not take into account the limitations of this equipment, or correctly interpret its output. Look at it this way- some watchkeepers seem incapable of correctly interpreting radar output or understanding that equipment's limitations, leave alone that of the ARPA; will anything be different this time around? A connected apprehension is that I see looming, on a far horizon, a 'Familiarisation with Thermal Imagery' STCW course.

There is also a possibility that this additional equipment- when it finally becomes commonplace, as I expect it will- will be an additional distraction, especially in conditions when just looking out of the porthole can yield faster and more accurate results. Parallels again with radar usage when in excellent visibility and good weather in daytime here, when a glance out the bridge porthole is often preferable to peering at the radar screen.
Consider this scenario when a ship is making port in daytime in good visibility. The Master, who normally has two eyes, now has a new toy that- when not really required- distracts him. He is keeping an eye each on the radar, steering, engines, the Third Mate, the crew rigging the pilot ladder and everything else, including the woman on the passing beach in a bikini. He is watching too many things, is probably overwhelmed with data and has likely degraded situational awareness; will he switch off thermal imagery for safety?

But as Captain Francesco Schettino of the Costa Concordia found out recently, if you concentrate on your friends on the beach you may be up the creek anyway, and nothing- not even subsequent non-thermal imagery about uncharted rocks - is going to save you or your ship.