There are over 100,000 cargo ships that carry around 90% of world trade, traveling 24 hours a day, every day. Still, this is an industry that works in silence. In this book, we get to follow the journalist Rose George’s journey on a cargo ship from Felixstove in the UK to Singapore. A journey that for five weeks takes her through the Suez Canal, the pirate waters of the Gulf of Aden (outside the coast of Somalia) and the Malacca stretch (between Malaysia and Indonesia).
FEW WESTERNER’S ON THE SHIPS. There was a time when Britain dominated the oceans. Today, British sailors are a rarity. The ships are today inhabited by Eastern European captains and officers as well as crew members from the Philippines (more than a third), Bangladesh, Indonesia or China.
THE FLAG OF CONVINIENCE. All ships must carry the flag of the country in which it is registered. Changing the flag for a ship leads to large savings. The US fleet has shrunk by 82% since 1951. Due to labor laws, wage levels and bureaucracy, it costs 2.7x more to run an US-flagged ship than a Panamanian flag. Staffing costs – as US crews then become mandatory – are 5.3x higher than for the Panamanian flagged ship. c. 70% of the world fleet is registered in “flag states”.
THE FREIGHT COST IS NEGLIGIBLE. Shipping things by sea used to be expensive. Transport costs could eat up 25% of a product’s final sales value. The invention of the container in the 1960s changed everything. Today it costs 1 cent to transport a can of beer from Ireland to New York. It is cheaper to ship Scottish fish to China (a journey of 16,000 km) for filleting and then ship it back to Scotland for sale than to fillet it on site in Scotland.
IMPACT ON ENVIRONMENT. Sea freight is allegedly the most environmentally friendly way of transport: 11 grams of CO2 per mile, compared to 110 grams for truck freight and 1,193 grams for air freight. The problem is the amount shipped. The largest ships can consume up to 300 tonnes of oil a day. The 15 largest ships emit as much as all the cars in the world. If the world fleet were a country, it would be the world’s sixth most polluting country, with larger emissions than Germany.
OUR SEAS – A CONTEMPORARY WILD WEST. An officer in the US Coast Guard called the shipping sector “managed anarchy”. There are no witnesses at sea and it is extremely difficult to investigate crimes. Also, ships must comply with the laws of the country whose flag they carry – the “flag of convenience” countries. On a global basis, two ships a week disappear without a trace. This is despite all the advanced technology available on ships and in ports.
THE RETURN OF THE PIRATES. Somali pirates have been a threat to the shipping sector since the end of the Somali civil war in 2000. Foreign fishermen combed Somali fishing waters with modern trawlers and the Somali fishing boats had no chance. Some unemployed fishermen then found how lucrative modern piracy could be. The average Somali earns £9k during his lifetime. With a successful hijack, he can earn twice as much in one swoop. In 2010, Harvard Business School named Somali piracy the world’s best business model. A hijack usually costs around $300k and the average profit margin is around 25-30%.
PIRACY STATISTICS. Between 2007 and 2010, 4,000 people were captured in the area, of which 67 died. When the book was written in 2013, 544 sailors were held hostage off the coast of Somalia. The pirates are not interested in the cargo (there are no ports for unloading in Somalia) but a valuable load means a high ransom. The average captivity time is 250 days, but the length depends on the spot market. If the market is strong, the opportunity cost is high and vice versa. The MV Iceberg’s was three years incaptivity, visible along the Somali coast.
CORPORATE BABUSCHKA STRUCTURES. The major shipowners are Norwegian, Greek and Danish magnates – family companies that maintain a level of integrity on a par with bank secrecy in the safest tax havens. Between a ship and the final owner, there is often a long and global chain of dozens of holding companies. In addition to a handful of Greek shipping companies, listed shipping companies are a rarity.