Piracy at Sea and the Looming Dangers for Coffee Cargo
Piracy and cargo theft has long been a concern in both the shipping business and the subsequent coffee supply chain, which depends on the safe and timely delivery of the beans. From the traditional pirate attacks that were ripe in Southeast Asian waters in the 1990s, attention shifted abruptly in the late 2000s to the brutality and frequency of piracy that arose in the East African waters off Somalia. In recent years, both security and technology on vessels have improved but pirates are getting smarter too, resulting in new and more advanced incidents of piracy and theft. How concerned should stakeholders in the coffee and tea industries be?
By Maja Wallengren
It’s just before dawn in the Malacca Strait some five hours before the Maersk-owned container ship is scheduled to arrive into the port of Singapore. Travelling the last stretch on board the vessel to accompany the crew into what is one of the world’s biggest container ports, the air is thick with tension. Before reaching the safety of the port, the ship must pass hundreds of tiny islands in waters notoriously infested with modern pirates. Even with the heavy presence of the Singapore Coast Guard, everybody is alert for any unusual activity, and for good reason: since 2014, the Southeast Asian seas have returned to become the world’s undisputed centre of pirate activity.
“You can’t help getting nervous, everybody in the shipping business in this part of the world either knows someone, or knows of someone, who has been involved in a piracy attack. The danger you feel is genuine, the risk is very much present,” a Danish officer on board the Maersk vessel told Tea & Coffee Trade Journal during the final hours through the Singapore Strait.
One of the most strategically important sea passages in the world, the Malacca Strait has historically also been one of the most dangerous ones to maritime trade. After a decade where the waters off the Somalia coast attracted the most news, Southeast Asia is again the main hub for piracy, said the International Maritime Bureau (IMB). Based in London, England, and operating as a unit under the International Chamber of Commerce, the IMB specializes in fighting maritime crime and malpractice. And with the danger looming at sea, stakeholders across the coffee industry are constantly watching the latest developments.
“Things got really bad seven to 10 years ago, with the situation in Somalia and in response to the wave of attacks at the time, the international community allowed for armed personal on board ships in international waters. That essentially put an immediate hold on new incidents, which have gone down dramatically since then,” said Adam Rekerdres, vice president of Rekerdres & Sons Insurance Agency Inc, based in Dallas, Texas. “Today, Southeast Asia is where most of the world’s piracy activity happens, but in the last few years we are also seeing a lot of incidents happening in Nigeria,” Rekerdres said. Rekerdres & Sons provides stakeholders in the global commodity sector with insurance against damage and theft to cargo from producing origin until the cargo arrives with end-buyers in importing nations.
A Popular Ransom Item
In an actual pirate attack – as featured in the 2013 blockbuster film Captain Phillips, which narrates the hijacking of the Maersk Alabama container ship in 2009 – the threat to human life is real but the commercial impact goes far beyond what is reported in a general news story, such as the fact that coffee cargo was on board the vessel infamously hijacked by Somali pirates.
“We had several containers of coffee on board the Maersk Alabama. Basically, you can assume that with any cargo ship coming out of any coffee-producing area, whether it be Asia, Africa, South or Central America, there is a risk of piracy or theft affecting coffee,” said Rekerdres, adding, “We’ve been providing insurance to coffee and tea exporters and importers for years and we see some sort of claim everyday; everything from a couple of bags in a container to several containers in full.”
A total of 246 attacks of piracy were reported in 2016, up from 245 in 2015, but down from the peak of 439 attacks in 2011, an IMB report published in October 2016 shows. Even if these figures suggest that piracy at sea is declining, the coffee industry cannot breathe a sigh of relief. With the value of piracy estimated to be worth between USD $7 and $12 billion a year – according to the US non-profit One Earth Future Foundation of Broomfield, Colorado, – green coffee is often found among the precious cargo on ships either being held hostage for ransom or robbed, shipping and coffee industry officials say.
“We should all be concerned about this issue because as a roaster, I buy coffee from all over the world, and even if such an attack wouldn’t affect the product itself, any kind of delay would cause logistical problems that could have economic repercussions,” said John Alexander, owner of micro-roasters Close to Heaven Coffee in Houston, Texas.
“Even though we are not responsible for the ships, it’s our product that is being carried and delayed, or interfered with,” said Don Pisano, president of the American Coffee Corporation. A medium-sized green coffee importer based in Jersey City, New Jersey, the company handles some 2,000 containers of beans a year from origins as diverse as East Africa, Southeast Asia, Papua New Guinea, Central and South America.
In monetary terms, a container’s worth of coffee varies in value from USD $40,000 for lower-grade, more commercial green coffee to well over $120,000 for high-end Sumatran beans and “the value goes even higher if you have micro-lots in the container,” said Pisano. In cases where the cargo is insured, he added, it’s the logistical delays that complicate business for the importers and roasters waiting for the delivery of the cargo. “The pirates’ main objective is money, to capture a ship, hold it for ransom and hope they’ll get paid. But in the meantime, the cargo could be sitting while waiting for negotiations to happen and your cargo is not moving,” he said.
Looking at the situation in Southeast Asia, it’s easy to understand how pirates here have succeeded in building up their massive illegal ocean empire. An estimated 130,000 ships – a third of annual global maritime cargo transport – pass through the Malacca and Singapore Straits, official Singapore port statistics show. Of these, many ships also must pass at least some stretch of the 95,000 kilometer-long and mostly unguarded Indonesian coast line. This is the primary reason for why Indonesia is home to more pirate attacks than any other country in the world, with 23.5 percent of all 141 attacks worldwide during the first nine months of 2016 reported from Indonesian territory. This is nearly half of all the activity in Southeast Asia, which as a region, was home to 51 percent of global piracy at sea in the period between January and September 2016, the IMB said. But as on board security has improved, the pirates are becoming smarter too.
“In the past, the best defence on board container lines were water cannons. Now ships have barbed wires and armed guards, which makes it very difficult for the pirates to take possession of the ships, but this has just made the pirates more creative,” said Rekerdres. “We have seen piracy become more high tech, and a new and large problem that would affect coffee as any other cargo is cyber piracy, where pirates are hacking systems at ports and succeeding in re-locating the goods, before the container is transferred to the ship,” he said.
Rekerdres said these pirates are very smart and resourceful. “They have managed to hack the on board navigation system and the in-port container movement system, and we know of cases where they even have been using drones to check out if there is armed security on a ship or not. These are the kinds of the new risks we have to deal with today.”
Assaults on Sea and Land
As piracy is becoming less about actual hijackings and more about simple theft, pirates today are commonly forcing vessels to anchor in unknown waters where they then rob the crew of personal belongings and cargo of interest. But overall, cargo theft continues to be rife with pirate attacks on land growing at the expense of piracy at sea.
“Virtually every importer has had cargo lost either on water or over land, or has experienced a container arrive that had been tampered with. Where it happened, we don’t always know. There are so many places where it can happen: at a mill, during transport, at transshipment points, or after arrival at the destination port, and a bolt seal provides only limited security,” said Pisano, who has served as a member on numerous trade and transportation committees, including that of the New York-based Green Coffee Association.
“We are definitively seeing more incidents of land cargo theft; especially in Latin America, from Mexico and Central America all the way down to Brazil,” added Rekerdres.
The nature of coffee cultivation being a crop located mostly in isolated and mountainous areas with little developed infrastructure, coffee-producing regions across emerging markets are particularly vulnerable to anything from natural disasters and armed conflict to a variety of crime. Coffee, being a cash crop, is one of the goods most frequently targeted when criminals go after easy prey.
In Colombia, for instance, an average of three robberies or assaults on trucks are registered daily and coffee is one of “the most coveted products” targeted together with electronics and cigarettes, Paola Escobar, general manager of the Bogotá office of Grupo ALTO, said in a report published 28 March in the Colombian business daily Pulso. A Chilean logistics company based in Santiago, Grupo ALTO specializes in integrated company security and tracking solutions and operates in Chile, Colombia, Mexico and Spain.
Those in the coffee industry who think doing business in Colombia is risky need look only at Peru, South America’s third largest coffee grower after Brazil and Colombia, to put things in perspective, as entire trucks full of coffee frequently go missing during the peak of the harvest.
“We have so many robberies in Peru that overland cargo shipment in Colombia looks peaceful in comparison,” said Ricardo Huancaruna, a private exporter in Peru and former president of the Peruvian Coffee and Cocoa Chamber.
Home to particularly treacherous roads, about two thirds of Peru’s coffee-producing regions are located in mountain regions so remote that cargo trucks spend up to several days slowly travelling through narrow winding roads that on any given day can be blocked by a landslide.
“We have so many mountainous roads and very limited machinery and personal to attend when a landslide occurs and blocks everything, and that makes it near impossible to protect trucks against hijacking or theft,” said Huancaruna.
New Security Measures
From the shipping lines and multinationals in the green coffee trade to logistics supply chain providers, steps are constantly being taken to improve security, insurance and tracking of cargo. This is particularly targeted through the enhanced use of Global Positioning System tracking devices, popularly known as satellite-fed GPS navigation systems that provide a geographic location of the cargo monitored.
“Just a few weeks ago, we brought in a new product, a GPS tracker the size of a quarter that can be put in anything as small as a bag of coffee or a full container and remain active for up to a whole year,” said Rekerdres. “In the past, these devices were big and expensive, so either they would get stolen or you would have to get it out and plug it into the computer, which was creating a lot of complications for all involved. This new device is much cheaper, easier to hide for the sender and easily removed and disposable for the end-receiver, so this is something we’d expect to see both multinationals and insurance companies use,” he said.
At the end of the day, and perhaps surprisingly, when considering the multiple challenges at stake, most of the coffee shipped around the world does make it safely all the way from producer or mill at origin to the final buyer in the country of destination. From seed to cup, industry officials agree that even if the risks are always there, measures today exist that allow for easier and safer management in the shipping of commodity cargo.
“Crime has existed since the beginning of time, but with good security practices, knowing who your counterparts are and knowing your service providers, you can take a lot of pre-caution and limit your risks,” said Pisano.
Maja Wallengren has been writing about coffee for over 23 years from 46 coffee-producing countries across Southeast Asia, East and West Africa and across Latin America. She may be reached at: [email protected].