Cost of piracy: a comparative voyage approach

The seizure by Somali pirates of the Saudi-owned VLCC, the Sirius Star, with its crew, in November 2008, captured international attention. Across the world, regular updates were given and the ransom demands discussed and debated in the press. Dramatic footage was shown on national television of the payment of the ransom by parachute and footage of the debacle which followed where some of the pirates were drowned. Until then, most of the non-shipping world thought of pirates as the romantic buccaneers aka Hollywood. However, the cost of piracy to industry and its impact on international trade cannot be ignored. There are potential geopolitical repercussions. Despite international efforts, piracy in this region threatens to put a chokehold on one of the world's busiest shipping arteries. Shipping lines are taking decisions to avoid the area, rerouting via the Cape of Good Hope. This article provides a methodology to measure the costs of piracy from the shipping company's perspective by taking a comparative voyage costing approach.