Rampant piracy attacks push up premiums

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Wednesday, 04 February 2009

THE rampant piracy attacks in the Gulf of Aden have caused a hike in shipping insurance premiums for vessels plying that area. The Maritime Institute of Malaysia centre for the Straits of Malacca research fellow Capt Rakish Suppiah said despite the increased efforts by the task force of naval powers from various countries, the piracy threats against merchant vessels in the Gulf of Aden remained active.
“The recent entry by China marks the largest ever naval existence in an area of water to suppress piracy.
“The situation in the Gulf of Aden has caused insurance premiums to rise in recent months,” he said in a statement.
According to Rakish, the hike in insurance premiums has prompted many ship owners to look for alternatives to maintain their profits during the current economic crisis.
“Many have resorted to reducing liner services and shortening transshipment via feeder vessels from the Mediterranean to the Middle East or North East Asia.
“Such efforts have shown remarkable cost-benefit for both the ship-owner and the consignee.
“CMA CGM recently announced it would divert its liner service around the Cape of Good Hope to avoid Suez Canal transit fees,” he said.
He added that with the price of fuel dropping down below US$50 a barrel, a longer route would not add to the cost but would instead provide security and cost efficiency for most shipowners.
“The cost of transit fee for a 9,000 20ft equivalent vessel via Suez Sanal is about US$600,000.
“By adding another seven days’ transit through the Cape of Good Hope, the owner indicated that there is not much change in the cost,” he said.
He said CMA CGM also indicated that sailing around the Cape of Good Hope had resulted in about US$300,000 in savings in the cost of crew and insurance.
“With the price of insurance at 0.5% of the ship value, there is a possibility that more shipowners would resort to other alternatives of re-routing their ships with the recent downturn in the fuel price,” he said.
Source: The Star