Do Pirates Have a Knack for Timing the
Justin Rohrlich August
6, 2010 3:20 PM|
hijacking of 23,755 cubic meters of sugar says they
might be smarter than we give them credit for.
MV Syria Star, flagged in Saint Vincent and Grenadines
and transporting an estimated 23,755 cubic meters of
sugar, was seized by Somali pirates in the Gulf of Aden
seem to have timed the market fairly well, after raw
sugar futures for October delivery on the ICE (ICE)
exchange hit a four-month high of 18.52 cents/lb. this
week. Apparently, it's due to a logjam at Brazil’s ports
(Brazil is the world’s largest sugar exporter), where
ships are waiting up to a month and a half to load supplies
and set sail (the usual time is about two weeks).
pirates are after ransom, not cargo—but they tend to
target high-value shipments. This time, they’re headed
back to shore with 23,755 cubic meters of deliverable
sugar, currently trading at a spot price of 24.37 cents/lb.
A quick back-of-the-envelope estimate shows that 23,755
cubic meters would accommodate approximately 53,247,825
lbs of sugar—with the right broker, they could do quite
of the pirates’ purloined sugar entering the market
is low, to say the least. However, even if they were
able to sell it, money manager Shawn Hackett, founder
and CEO of Hackett Financial Advisors, a firm with a
focus on agricultural commodities, contends they got
in too late.
no scarcity of sugar,” he tells Minyanville. “This is
just a temporary, short-term rise in sugar prices because
of the transport problems Brazil is having. That’ll
get resolved quickly, and besides, India, the other
sugar-producing country the world relies on, just came
in with a record-setting crop.”
So, the pirates
may have been better off just going the ransom route,
as is their usual MO.
vessels generally sail too high off the water for Somali
pirates and are relatively fast. Thus, tankers and dry
bulk ships that carry oil, chemicals, coal, wheat, and
other commodities are more desirable targets.
Sirius Star, was hijacked in November, 2008. It was
carrying two million barrels of oil worth $100 million,
and was finally released on January 11, 2009, after
$3 million in cash was dropped to the pirates from an
aircraft. It was the highest-ever ransom paid, at the
a year later, pirates hijacked the New Orleans-bound
tanker Maran Centaurus, which was carrying 2 million
barrels -- $150 million worth -- owned by Valero Energy
(VLO). In January, a ransom estimated to have been between
$5.5 and $7 million dollars was paid, again, dropped
by parachute from a helicopter.
that the value of the ship and its cargo are usually
worth far more than their ransom demand, and a few million
dollars is a drop in the bucket (barrel?) in relative
So, how does
you own a tanker or the cargo it’s carrying. In the
event of a pirate attack, the vessel’s crew contacts
company headquarters, which in turn, contacts its insurance
company, which in turn, contacts a security firm like
London’s Control Risks, which begins negotiations with
ransoms is not illegal," Guillaume Bonnissent,
a special risks underwriter for Hiscox Insurance Co.
Ltd, which writes about two-thirds of the world's kidnap-and-ransom
insurance policies, told Time magazine. It is, however,
illegal for insurance companies themselves to pay ransoms,
which is why Control Risks and others make the payments.
"K&R is really reimbursement," Bonnissent
said. "We reimburse clients for ransoms paid."
money is concealed in large floating plastic containers,
and flown by air and dropped," says Mike Regester,
an insurance broker for Cooper Gay. "Then the pirates
go out and pick it up," he says.
As the pirates
know ships are generally required to carry K&R coverage
for navigating through Somali waters, they know they'll
be paid -- unless they're caught first by the international
naval fleet protecting the shipping lanes. But last
year, 68 successful hijackings were carried out in 200
attacks, netting total ransoms believed to exceed $50
hijackings are financed by what may well be the world’s
most unusual “stock market.”
named “Mohammed” said that, in Haradheere, 250 miles
northeast of Mogadishu, brigands set up an exchange
of sorts to fund their activities.
months ago, during the monsoon rains, we decided to
set up this stock exchange. We started with 15 'maritime
companies' and now we are hosting 72. Ten of them have
so far been successful at hijacking.”
that, "The shares are open to all and everybody
can take part, whether personally at sea or on land
by providing cash, weapons or useful materials."
After a ransom
payout for releasing a Spanish vessel, “investor” Sahra
Ibrahim, was lined up outside the exchange waiting for
waiting for my share after I contributed a rocket-propelled
grenade for the operation," she said.
really happy and lucky. I have made $75,000 in only
38 days since I joined the 'company.'"
considering how she would have done had she invested
her RPG in JDS Uniphase (JDSU), Cisco (CSCO), or Lucent
(LU) in, say, February, 2000.
investors’ money -- and, to my knowledge, no airdrops
have yet been scheduled to reimburse them.