Shipping costs to trim as regional risk area downsized

Dubai: Shipping costs in the Middle East are expected to drop when a designated high-risk area, previously prone for Somali pirate attacks, is halved in December.

The revision of the BMP4 (Best Management Practices for Protection against Somalia Based Piracy) — announced last week — will likely see shipping operators cut back on security measures that had run up costs.

“It costs a lot of money to adhere to the recommendations [of the BMP4],” Ian Millen, Chief Operating Officer at Dryad Maritime, an international monitoring organisation, told Gulf News by phone from London.

The BMP4 has been revised, halving the high-risk area, after two years without a successful hijacking of a large commercial ship and more than a year since shots were fired on a commercial ship.

“We just haven’t seen incidents,” London-based Tim Hart, maritime manager at Control Risks, said by phone.

The revised area — effective December 1, 2015, will cover the Bab Al Mandab strait, Gulf of Aden and the Arabian Sea from the coast of Oman and down to Kenya in Africa but no longer the Red Sea, Gulf of Oman or Indian coastline.

The Bab Al Mandab, in the Horn of Africa, separating the Arabian Peninsula and east Africa, is a vital thoroughfare for maritime trade. Most ships passing through are either coming from or going to Egypt’s Suez Canal, through which around 8 per cent of the world’s trade passes each year.

Commercial shippers have had to introduce safety measures including employing armed guards, which saw costs, run into the thousands, according to Millen, wrapping razor wire around the edges of the ship to fend of hijackers and a rise in insurance fees.

These costs are now expected to drop, maritime experts say, because the advice will be that the security measures the shippers have been following should now be adhered to in half the area.

Matthew Pickin, Counterparty Risk Analyst at Infospectrum, told Gulf News by email the revision of the BMP4 is expected to have a “positive effect on the costs for some of the large operators.” However, he also said that many of “low profile ship operators will likely proceed as normal, with or without the necessary precautions.”

The drop in piracy has also seen companies who provide armed guards to commercial shipping lines “unexpectedly” declare bankruptcy, Pickin said, a sign that shippers have already started cutting back on added security costs.

Maritime experts say piracy attacks fell due to a combination of greater industry collaboration in reporting incidents, the introduction of preventive measures, such as guards and razor wire, and also naval patrols.

There are a “huge amount of [navy] patrols and assets going through the area,” Hart said.

US, Nato, EU, Russian, Indian and Australian, among other naval forces, have patrolled the BMP4 for years, however, this is also expected to be cut back now that the risk area is halving.

The BMP4 was revised partly due to Omani and Indian lobbying efforts, according to Millen.

Ships had been hugging the Indian coastline in effort to avoid the high-risk area that ran up to their waters, while also in 2012, Italians on-board the MV Enrica Lexie shot and killed two Indians off the coast of southern India after mistaking them for pirates.

“The Indian’s were not happy that the high-risk area went right up to their territorial waters … those are really, really busy shipping lanes and area, so you’re just introducing more traffic,” Millen said.

But even with the revision, attacks are still expected with smaller scale incidents continuing to occur off the coast of Salalah and Somalia.

“The area that is redrawn is still a considerable area. No one thinks the threat has completely gone away,” Millen added.