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-- Somali Pirates Are Getting Rich: A Look At The Profit Margins
Somali Pirates Are Getting Rich: A Look At The Profit Margins
quote:
Wednesday, Apr. 15, 2009
Somali Pirates Are Getting Rich: A Look At The Profit Margins
By 24/7 Wall St.
Errol Flynn never had it this good in Captain Blood.
Being a Somali pirate looks like a profitable business from the outside and it is. The margins are as attractive as those in the software industry. Microsoft still makes 60% or better margins on its core Windows, business, and server operations. With the risks that the pirates take, they ought to do as well as that.
The New York Times did a piece last year in which it estimated that the pirates would bring in $50 million in 2008. That number will be higher this year, by as much as four times. ](See pictures of the brazen pirates of Somalia.)
Most information on hijacked ships is that the ransom paid to get them back is about $2 million per vessel and crew. In some cases, the pirates actually charge an additional fee for the ships which has been estimated as being as high as $5 million.
Based on 24/7 Wall St.'s evaluation of news reports, the Somali pirates are seizing near one ship per day now. This week, on a single day, they took over four vessels. Even though several large national navies including the US are policing the shipping channels to cut down piracy, the rate at which the pirates can grab prey is picked up fairly fast. The Somali pirates could take over between 80 and 120 vessels this year, and the figure is conservative. That would put their gross revenue as high as $200 million.
The pirates almost certainly pay protection to the head of the Puntland, Mohamud Muse Hirsi. Puntland is the region where most of the large "mother ships" that take the small pirate raiders out to sea, are located. For protection from international intervention on land, senior Puntland officials are probably getting a third of the take, or about $65 million.
The next largest expense is buying and keeping "mother ships" in good working order. The boats are usually trawlers which are, based on photos, about 100 feet long. One or two of these have been sunk by foreign navies, but they do not have to be replaced often. A large trawler built in the 1970s costs about $1 million. A trawler that is ten years old costs closer to $3 million. Some of the trawlers the pirates use were probably seized during their raids. Most research indicates that one out of three attempts by the pirates to hijack a ship succeeds. Covering enough ground to seize 120 vessels a year based on 400 attempts means that the pirates are probably running a dozen mother ships at any one time. The costs to "buy" and maintain those ships is about $3 million each per year, because a trawler that is seized for use and not ransomed is $3 million in revenue not taken in. Mother ship costs are at least $30 million, maybe $36 million. These are not annual costs. For each one sunk, the cost of replacement is $3 million. On a pro forma basis for operations, the cost of mother ships is $6 million.
Each mother ship works with four or five attack vessels, which are not unlike WWII PT boats, but are made of light-weight metal or composite instead of wood. Each of these has to run on two or more turbo diesels which put out 480 HP at 3,000 PRM. These are not engines which are likely to be used on any of the hijacked ships so they are probably one of the largest direct costs the pirates have. If the pirates operate 50 raiding boat it requires 100 engines. These cost as much as $15,000 each, so the cost of these is about $1.5 million. In most cases, they will not need to be replaced every year. The boat themselves are probably less than $50,000 for the 50 shells the total $2.5 million. Once again this is a one-time cost for those that are not sunk or abandoned.
Fuel for these diesels is probably very expensive but a lot of that can be taken from captured ships.
The pirates have to work with crews of mechanics, but their wages are probably modest.
Each mother ship and raider requires high- end GPS, radar and sonar. The best radars available for small ships run about $4,000. High end GSP system cost about $1,500, and sonar systems a little less than $1,000. All of the equipment runs about $400,000 for 12 trawlers and 50 raiders before installation costs. Once again, this is not an annual cost because most of the hardware can be used for several years.
The cost of what are called "extreme weather and marine" satellite phones from one of the two premier global providers, Iridium and GlobalStar, is $1,200 per unit. The cost of calls per minute is $5. Total cost for phones comes to $60,000 based on each team of pirates having two phones, and all of these probably get replaced each year due to damage. Assuming 100 minutes a month per phone and the total cost of airtime is $600,000.
Weapons are one of the largest single costs that Somali pirates have. According to a book on AK-47s from Amazon, the guns cost about $345. That is a total of $173,000 because each of 500 men is armed. The price for 9MM pistols on the black market runs about $200, for a total of $100,000. Browning 50 caliber machine guns are $14,000 each, with at least one per raider and two per mother ship for a total cost of just over $1 million. Rocket propelled grenades which are used in most raids run $3,000 and one is used in each of the 400 hijacking attempts for a total of $1.2 million. Total ammunition costs at $1 per bullet are $250,000.
Food and housing for 500 men and an average of 200 hostages has to be $10 a day, or $2.5 million a year.
Based on annual costs with pro forma calculations for things that have a life of more than a year, the expenses of operating the Somali pirate operation are $79 million. That puts the profit of the operation at over $120 million. It is worth contrasting that to the average income per capital in Somalia which is only about $600.
The pirate business is not going away. It is too profitable.
� Douglas A. McIntyre
See more pictures of modern piracy in Somalia.
source:
http://www.time.com/time/business/a...id=rss-business
Yo ho, yo ho, a pirate's life for me.
We pillage, we plunder, we rifle, and loot,
Drink up, me 'earties, yo ho.
We kidnap and ravage and don't give a hoot,
Drink up me 'earties, yo ho.
Yo ho, yo ho, a pirate's life for me.
We extort, we pilfer, we filch, and sack,
Drink up, me 'earties, yo ho.
Maraud and embezzle, and even high-jack,
Drink up, me 'earties, yo ho.
Yo ho, yo ho, a pirate's life for me.
We kindle and char, inflame and ignite,
Drink up, me 'earties, yo ho.
We burn up the city, we're really a fright,
Drink up, me 'earties, yo ho.
We're rascals, scoundrels, villans, and knaves,
Drink up, me 'earties, yo ho.
We're devils and black sheep, really bad eggs,
Drink up, me 'earties, yo ho.
Yo ho, yo ho, a pirate's life for me.
We're beggars and blighters, ne'er-do-well cads,
Drink up, me 'earties, yo ho.
Aye, but we're loved by our mommies and dads,
Drink up, me 'earties, yo ho.
| quote: |
| Originally posted by Abercrombie |
Do these guys have a ticker symbol? Seems like a smart investment to me.
Can someone please...PLEASE...explain to me how...
1. These ships are not arming themselves for defense...
2. These protecting navy's can allow for all of these hijackings...
How FRICKING hard is it to protect yourself from a dingy???
well, those pirates pretty much ARE somalia's navy
LOL @ the graph
| quote: |
| Originally posted by DigiNut Do these guys have a ticker symbol? Seems like a smart investment to me. |
| quote: |
| Originally posted by DaRoZa well, those pirates pretty much ARE somalia's navy |
Put a couple of these on each ship...
...problem solved
| quote: |
| Originally posted by VDub Can someone please...PLEASE...explain to me how... 1. These ships are not arming themselves for defense... 2. These protecting navy's can allow for all of these hijackings... How FRICKING hard is it to protect yourself from a dingy??? |
GO CANADA!!
Canadians nab pirates after 7-hour chase in the dark
OTTAWA � Canadian sailors apprehended a band of Somali pirates at gunpoint early Sunday morning after a seven-hour pursuit across the Gulf of Aden, much of it under the cover of night.
HMCS Winnipeg, sailing off the Horn of Africa as part of a NATO-led anti-piracy mission, was escorting a United Nations food shipment when it happened on a skiff carrying seven bandits attempting to hijack the MV Front Ardenne, an 80,000-tonne tanker from Norway.
The Somalis ignored warning shots fired by a Canadian naval helicopter and fled the scene. HMCS Winnipeg, led by Commander Craig Baines, left the food shipment to other NATO vessels and gave chase.
An American ship also joined the pursuit. It was the Canadians who got to the pirates first.
As darkness fell, Cdr. Baines cut the lights and caught up with the smaller vessel by stealth. After firing another flurry of warning shots, sailors boarded the pirate craft, recovering a rocket-propelled grenade round.
�We blocked their path,� Michael McWhinnie, a spokesman for HMCS Winnipeg, told the Reuters news agency.
�We were faster and surprisingly more manoeuvrable than the pirate skiff.�
Prime Minister Stephen Harper praised HMCS Winnipeg's 240 crew members, who were sent to the Gulf of Aden earlier this month to join a patrol of the North Atlantic Treaty Organization that includes ships from Portugal, the Netherlands, Spain and the United States.
Still, Mr. Harper was forced to confront what is emerging as a significant weakness in the international effort to combat piracy off Somalia, a lawless country that lacks a governing authority strong enough to crack down on its growing number of the seafaring gangs.
The NATO patrol saved the Norwegian tanker from capture and robbed a gang of bandits of weapons, most of which the pirates tossed into the sea while being chased.
But after all that, the Somalis were released. The Canadian sailors, like their NATO allies, lack the authority to make arrests in international waters.
�We did briefly detain pirates and disarm them,� Mr. Harper told reporters after concluding a summit with leaders from the Americas in Port of Spain, Trinidad and Tobago. �Those were the appropriate measures under the circumstances.�
Asked whether Canada might take a more aggressive role and even fire on pirates' crafts, Mr. Harper said, �We use force when necessary, but only when necessary.�
HMCS Winnipeg is one of about 20 warships deployed by members of NATO, the European Union and big exporting nations such as China and India to patrol the Gulf of Aden, one of the world's busiest trade routes.
In 2008, there were 111 pirate attacks off the coast of Somalia, triple the number during the previous year, according to the International Maritime Bureau, a London-based organization that attempts to combat crime on the seas.
Pirates captured 42 of those vessels, including a Saudi supertanker called the Sirius Star and the MV Faina, a Ukrainian ship carrying tanks.
The international armada has had some success in repelling more and more gangs of gun-and-grenade wielding marauders.
Before the weekend, there had been 68 attempts this year, but only 18 captures, often of smaller vessels.
Still, there's little sign the pirates are close to letting up.
Many of them are poor fishermen and young unemployed men who have seen their brazenness rewarded with tens of millions of dollars in ransom payments, Hours before HMCS Winnipeg set off on its chase, the Belgian government confirmed that a 1,850-tonne dredger from that country called the Pompei� and the ship's 10 crew members had been taken by bandits.
Also on Saturday, Dutch marines foiled a short-lived hijacking of a Greek-owned tanker, saving about 20 seamen from being added to a hostage list that currently is in excess of 300 people, according to a count by the Associated Press.
Like Canada's sailors, the Dutch were forced to release their captives.
The Canadian and the Dutch sailors, for example, are permitted to detain pirates only if they attack Canadian and Dutch citizens or property. Otherwise, they must disarm them and set them free.
�There have been a lot of comments in the media about how much easier it was a couple hundred years ago, when we could just hang them from the yard arm,� Canadian Rear Admiral Bob Davidson said in an interview with CTV's Question Period Sunday. �There's the rule of law that needs to be applied, so we're not currently regularly detaining them, no. There are all kinds of challenges with that.�
http://www.theglobeandmail.com/serv...iracycanada0419
And why can't Hess shipping companies invest in some defensive weapons and training...
They're spending millions in ransom and it can't cost that much to defend yourself...
Has anyone asked this question?
What are those cargo ships doing so close to Somalia's shores in the first place? Those small boats are incapable of going that far out into the ocean/sea. Also, are you aware that many of those so called 'commercial containers' are actually being used by illegal arms traders that use that entire region as a port for smuggling and supplying dictators and warlords with the same weapons that the pirates use against them?
..another point. Many of those 'commercial ships' are there illegally. Fishing along their coast, virtually looting their vast & greatest resource 'seafood' because they think/thought... 'what can Somalia do to us?' 'are they gonna stop us?' I guess many of them are thinking twice now. What would/does the CAForces do when illegal fishing vessels and containers show up in our shores? Somalia just lacks a strong or proper army to do anything about it.
| quote: |
| this doesn�t make hostage-taking justifiable, and yes, some are clearly just gangsters - especially those who have held up World Food Programme supplies. But the �pirates� have the overwhelming support of the local population for a reason. The independent Somalian news-site WardherNews conducted the best research we have into what ordinary Somalis are thinking - and it found 70 percent �strongly supported the piracy as a form of national defence of the country�s territorial waters.� During the revolutionary war in America, George Washington and America�s founding fathers paid pirates to protect America�s territorial waters, because they had no navy or coastguard of their own. Most Americans supported them. Is this so different? |
| quote: |
| Originally posted by Stilez |
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