New premium for goods
Shipping lines have introduced a new insurance premium for goods destined for Mombasa port, piling pressure on the cost of imported products in the region.The new premium, known as the general cartage insurance, stems from a recent resurgence of piracy in the Gulf of Aden where more than 45 ships and 800 sailors have been hijacked in the past 14 months.
Strong demand for South African coal in the fast-growing Asian economies is also taking up large fractions of the available shipping capacity and exposing more ships to pirate attacks adding pressure to the cost of sea transport.
Shippers began levying the new premium on March 1 and importers have promised to pass on the additional cost to consumers, heralding a surge in the cost of imported goods in the coming weeks.
Somali pirates have in the recent past hijacked oil tankers, passenger ships and yachts but have since turned their guns on the slow-moving bulk coal carriers.
Gilbert Langat, the chief executive officer of Kenya Shippers Council (KSC), whose membership is composed of both importers and exporters, said the new insurance premiums could push the cost of imported goods by a margin of up to 10 per cent.
The levying of cartage insurance, which shippers say raises the cost of underwriting goods in transit by eight per cent, is expected to fuel use of fake insurance stickers by transporters to reduce their costs, exposing cargo owners to high risk of total loss in case of an accident or criminal attack.
Exclusive application of the new insurance premium to local transporters is causing fear of potential loss of business to competitors in the region, whose charges are expected to remain the same.
The increase will affect local transporters disproportionately as it does not apply to competition from the other players in the region. This poses the risk of loss of business to other players in the region whose costs will be lower than ours, said Ms Eunice Mwanyalo, the chief executive officer of the Kenya Transporters Association (KTA).
Last year, Lloyds of London found that insurance premiums on vessels passing through the pirate-infested Gulf of Aden have risen by between 0.05 per cent and 0.175 per cent of the value of cargo, compared to between 0 per cent and 0.05 per cent in May 2008.
The high cost of keeping global trade routes open could result in a growing piracy tax that will be felt by a wider range of businesses and consumers, already battered by the effects of recession, Lloyds said.
The number of piracy attacks surpassed the 400 mark last year, the highest since 2003 with attacks off the Somalia coastline accounting for more than half the total, according to the International Maritime Bureau (IMB).
The total number of incidents attributed to Somali pirates in the 12 months to January 2010 stood at 217.
Source:shiptalk
