Matson puts rates on hold
By Andrew Gomes
Advertiser Staff Writer
Matson Navigation Co. said yesterday that it wants to help ease economic hardships for Hawai'i businesses and, despite increased operating expenses, it will delay its traditional year-end decision on whether to raise general shipping rates.
A decision will be deferred until the first quarter of next year, the company said, but it is unlikely that an increase will be avoided completely because of continued investments in equipment, technology and a possible order for two $100 million cargo ships.
Still, the delay came as a relief for some Matson customers. Laurence Vogel, president and chief executive of food distributor Y. Hata & Co., said his industry is overloaded with inventory because hotels, cruise ships, restaurants and other customers are buying less.
"They are doing anything to help cash flow to stay alive," Vogel said, adding that deferring any change in shipping rates for a few months will help. "It is extremely welcome news. ... The only thing better would be a reduction in rates."
Matson spokesman Jeff Hull said avoiding a rate increase is unlikely, but he did not rule it out.
"We'll just have to evaluate that," he said.
The last time Matson did not implement a general rate increase was in 1998, after 10 consecutive years of rising rates. In recent decades, the rate increases have been generally modest.
Shipping rates affect roughly 90 percent of all goods sold in Hawai'i. The typical annual shipping rate increases of between 2 percent and 4 percent add a few cents to commodities spread among many industries.
Matson handles about 70 percent of the ocean freight moving between the Mainland and Hawai'i.
The company's largest competitor, CSX Lines, usually mirrors Matson's rate moves. CSX officials could not be reached yesterday.
In previous instances, Matson increased its rates to offset higher costs for labor, fuel and investments.
In November 1999, Matson announced a 3.9 percent general shipping rate increase. A year ago, the company announced a 3.5 percent hike. Matson also has a 4.75 percent fuel surcharge in effect, though that surcharge likely will be reduced soon because of lower oil prices, Hull said.
The most significant factors determining whether Matson imposes a general rate increase, and for how much, would include fuel consumption and investments in technology and equipment. Hull said Matson is burning more fuel because its ships are traveling faster to offset delays from increased Coast Guard security checks.
Matson is also in the final stages of its $36 million Sand Island terminal improvement project. In the next 60 days, the company will be able to track via satellite all container-handling equipment at its main terminal.
The addition of two new ships priced at roughly $100 million each also could be a factor. Matson solicited bids this past summer to replace two ships in its aging 15-ship fleet. The company is evaluating bids and negotiating specifications with three Mainland shipyards.
Matson expects to decide whether to go forward with an order by the end of the year, according to James Andrasick, senior vice president and chief financial officer of Matson's parent company, Alexander & Baldwin Inc.
If Matson orders the ships to be built, the vessels could be ready for delivery as early as 2003 and 2004. The ships, to be used in Matson's Hawai'i service, would be the first new additions to the fleet, which has an average age of 28 years, since Matson introduced the $160 million R.J. Pfeiffer in 1992.
"We do have an aging fleet, and it is an issue," Hull said.
Although Matson has a $155 million capital fund for shipping-
related improvements, the expense for new ships would be a factor in implementing a general shipping rate increase, Hull added.
The company recently removed one of eight ships from its Hawai'i service in anticipation that container volume will be down about 10 percent this quarter. No further reductions in service are expected.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
