Indian coal buyers struggling with Somali pirate attacks on ships from South Africa find taking longer routes of limited use and are turning to Australia and Russia for fuel to avoid the Indian Ocean completely.
Somali pirates, whose hijacking of oil tankers, bulk cargo ships and fishing vessels costs world trade billions of dollars a year are growing bolder.
"Given the amounts they have made recently, I would anticipate ever-better armed and trained pirate crews at the top end as well as a proliferation of wannabes at the lower end," said J Peter Pham, Africa director with US think tank the Atlantic Council.
In addition, the use of Nato ships to enforce a UN embargo on Libya will stretch anti-piracy efforts.
"NATO & EU NAVFOR were struggling with finding some slack to send some ships after pirates in the 'deep' Indian Ocean. After Libya, that's not going to happen," said Michael Frodl, founder and head of maritime risks consultancy C-LEVEL.
India has a growing, structural need for imported coal to fuel a power generation boom, unlike China which imports only when domestic prices fall below international levels.
India's imports could leap 70% in FY12 to 142 million tonne, the coal minister said in March.
India's need for coal is clear but where it comes from is more flexible. For the past year 30% of South Africa's 60-63 million tonne of coal exports have been shipped to India.
But the rising cost of piracy is forcing Indian traders to look elsewhere and this could hurt South African exports.
Somali pirates, rather than Zimbabwe's political instability, pose the biggest threat to Southern Africa's security, South African Defence Minister Lindiwe Sisulu said on Tuesday.
TORTURE AND MOTHERSHIPS
A fresh development this year has been pirates' capture of commercial ships and crews at gunpoint and use of torture to force crews to operate the vessels as 'motherships.'
"The use of large ships in this role gives the pirates reach across the whole Indian Ocean and gives them an 'all-weather' capability that they just didn't have a few months ago," said Peter Hinchliffe, secretary general of the International Chamber of Shipping.
The Indian Navy has responded to the growing threat by trying to flush pirates away from India's west coast - India imports coal into the east, west and south.
The upshot is pirates are being forced to the southern tip of India - precisely where many coal ships have diverted since February.
"I do expect to see more attacks on the Cape to Malacca as well as Cape to Bay of Bengal -- because we expect to see more attacks south of India and Sri Lanka," said Frodl.
"We are having to evaluate not just the least risky routes to take from South Africa to India but also the best Indian ports to discharge and also now, where are the least risky places to pick up a vessel to begin its voyage to South Africa," said an offical at Indian coal importer Comtrade.
"The ideal ports to discharge safely are Tuticorin right at the southern tip of India, or the bigger new east coast ports like Krishnapatnam or Gangavaram," he said.
Indian importers have been diverting South African ships around Madagascar, away from Somalia's coast and straight for Tuticorin at India's southern tip.
From there, ships hug the coast and head for east and west coast Indian ports.
Several of India's trader importers said they had already bought Australian or Russian coal instead of South African because of piracy.
"Piracy is a real and significant cost added to South African coal - around $2 a tonne - given the quantities being shipped, this is a lot of money," the Comtrade official said.
"Depending on the route, the diversions add up to 5 days voyage time, plus the huge insurance premiums demanded and even the cost of bunker fuel at Richards Bay is higher than at Newcastle, so we're all looking hard at Australia and to a lesser extent, Russia," said a source at Coal and Oil, one of India's biggest importers.
South African exporters doubted the cost of piracy would shrink what is a key market for the country's coal.
"We've not yet had any Indian importer mention piracy as a reason not to take South African coal," one major exporter said.
