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The High Price of Avoiding Maritime Pirates

Take the Gulf of Aden, or Go the Long Way? 
 
Piracy translates to major maritime expenses as captains take steps to protect ships from being attacked or hijacked. The extra costs include hiring additional security personnel or systems and paying higher insurance payments, or rerouting ships.
 
To deal with piracy in the Gulf of Aden, the ship must either risk going through the vicinity, or opt to reroute through the Cape of Good Hope. The lower the cargo value, the more it may make sense to reroute. The higher the cargo value, the more likely the delay will be undesirable.
 
Between a Rock and a Hard Place
 
The numbers aren"t pretty. To reroute a vessel through the Cape of Good Hope, the additional cost is roughly $260,500. But the additional security costs to go through the Suez Canal are worse, averaging at least $350,000 per vessel.
 
According to the U.S. Department of Transportation (DOT), routing a tanker from Saudi Arabia to the United States via the Cape of Good Hope adds approximately 2,700 miles to the voyage. This longer distance will increase the annual operating cost of the vessel by reducing the delivery capacity for the ship from about six round-trip voyages to five voyages. The additional fuel cost of traveling via the Cape of Good Hope is about $3.5 million annually.
 
In the liner trades, the cost associated with avoiding risk is more complicated. Rerouting means an additional vessel is necessary to maintain the scheduled service and capacity obligations of the liner operation.  Per DOT, a routing from Europe to the Far East via the Cape of Good Hope, rather than through the Suez Canal, would incur an estimated additional $89 million annually, which includes $74.4 million in fuel and $14.6 million in charter expenses.  The rerouting would also increase transport times by about 5.7 days per ship.  This would result in the need for an extra vessel to keep up the service frequency.  
 
The war risk insurance for ships transiting the Gulf of Aden is estimated at $20,000 per ship per voyage, and that figure does not include injury, liability, and ransom coverage. According to the Maritime Administration, the increased cost of war risk insurance premiums for the 20,000 ships passing through the Gulf of Aden could reach as much as $400 million. 
 
The financial and emotional costs to deal with piracy will continue to be a major drain to the maritime industry. For an update on counter-piracy events, visit www.marad.dot.gov.

By Adam Herschkowitz
Get Captain Jobs, Contributing Editor

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