Matson hikes surcharge; cites rising fuel costs
By Frank Cho
Advertiser Staff Writer
Matson Navigation Co. Inc. said it is raising the fuel surcharge it assesses shippers for transporting cargo for its Hawai'i and Guam service starting early next month, a move that will increase the cost of everything from cabbage to cars.
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Matson, the largest maritime transportation company operating between Hawai'i, Guam and the U.S. Mainland, said fear of war in Iraq has fueled a dramatic rise in oil prices in the past year and has caused operating costs to increase by millions of dollars.
Matson says the higher surcharge will help cover the cost of the 1.6 million barrels of fuel it buys annually.
The higher charge from 6 percent to 7.5 percent takes effect March 3 and will help Matson cover the cost of the 1.6 million barrels of fuel it buys annually. The company is also dealing with increased labor costs related to its recent contract settlements with unionized workers that provided them with improved pay and benefits under a new six-year agreement.
"We cannot continue to absorb these additional fuel-related operating costs," said Paul E. Stevens, an executive vice president at Matson. "Anyone who drives a car is familiar with the recent spike of gas prices at the fuel pumps. For transportation companies, the costs are especially significant."
Roughly 90 percent of all goods sold in Hawai'i arrive by ship. But experts said yesterday the actual increase to consumers will likely be minimal as the relatively small increase will be spread among many industries.
CSX Lines, Matson's primary competitor in the Hawai'i market, said it is also considering raising its fuel charge from 6 percent. The company said a decision is expected early next week.
The cost of bunker fuel, the type of oil that Matson and competitor CSX use to fuel their ships, has more than doubled from $17 a barrel in 2002 to nearly $40 per barrel this year. For every dollar increase in the price of a barrel of oil, Matson said its operating cost rises about $1.8 million annually — or about $40 million since early last year.
The oil industry has blamed the higher prices on tensions in the Middle East and a strike in Venezuela that has crippled that nation's petroleum industry. Venezuela is one of the largest exporters of crude oil to the United States.
"Certainly the indications are that we will be raising our surcharge," said Marvin Buchanan, CSX's director of marketing and pricing for Hawai'i, Alaska and Guam. "We are monitoring oil prices every day, and it seems to be going up every day. The price now has gotten up higher than it was during the Gulf War. "
Hawai'i's maritime companies, however, are not the only ones affected by war jitters.
Aloha Airlines earlier this month started charging its customers an extra $3 per flight to cover the rising cost of aviation fuel. Hawaiian Airlines also instituted a fuel tax on interisland flights effective Feb. 4.
Consumers are also feeling the effects at the gas pumps as gasoline dealers raise their prices citing a world supply shortage. In Hawai'i, the average price of a regular gallon yesterday was $1.801, according to the AAA auto club, an increase of 20 cents per gallon from a year ago when the average price was $1.601.
Industry experts say the problem has been exasperated by suppliers who are refusing to purchase oil at the higher prices because of fear that if a war is avoided, prices would fall rapidly and they would be stuck with the now overpriced oil. This is creating a shortage of supply for refiners and wholesalers that is helping to drive up everything from electricity costs to the price of gas at the pump.
Matson has historically adjusted fuel surcharges based on the price of oil. In November 2001, Matson reduced its fuel surcharge from 4.25 percent to 3.25 percent because of lower oil prices. The company increased the surcharge to 4.75 percent in May 2002 and again in October to 6 percent.
Reach Frank Cho at 525-8088 or fcho@honoluluadvertiser.com.
