Posted on: Friday, October 8, 2004
Matson, Horizon raise their shipping price
By Lynda Arakawa and Catherine E. Toth
Advertiser Staff Writers
Hawai'i's two major ocean cargo carriers yesterday said they will raise their fuel surcharge as a result of record-high crude oil prices.
Matson Navigation Company and Horizon Lines said their fuel surcharge will increase to 9.2 percent from 8.8 percent beginning Oct. 18.
It is the third time the companies have raised fuel surcharges this year. They raised the surcharge to 8.8 percent from 8 percent in June after having raised it to 8 percent from 7.5 percent in March.
"Given the fact that fuel prices are at a record high ... I think people are recognizing that that is an issue," said Matson spokesman Jeff Hull. He said the new surcharge rates are a modest increase given the record oil prices.
Crude oil futures reached a record $53 per barrel yesterday before settling at $52.67 on the New York Mercantile Exchange. Some industry professionals believe the price could go as high as $55 a barrel.
The increase in the fuel surcharge highlights once again Hawai'i's dependence on shipping to bring goods to the Islands. An estimated 80 percent of what is consumed in Hawai'i is imported, and 98 percent of that comes by sea, shipping officials say.
The rise in the fuel surcharge will have an immediate impact on the cost of shipping a car from the Mainland. The cost on Matson will rise to $963 from $959, while Horizon will increase its rate to $962.11 from $958.71.
Some retailers here said they plan to pass the increased shipping cost on to consumers, while others will absorb the cost as an added expense.
The higher surcharge will ultimately be reflected in higher prices for consumers, said Karen Wakuzawa, secretary-treasurer of produce wholesaler Y. Fukunaga Products Ltd.
"I think the frustrating part is that there's nothing we can do because we still have to use them to bring in our produce," she said. "We have to pay it. ... And then it gets passed along and everyone feels it."
Glenn Tamura, president of Tamura Enterprises, which runs Tamura's Wahiawa, also said the cost will be passed on in the grocery pricing.
"I'm pretty sure everybody is going to have to," he said. "No one is going to eat that."
Between 50 and 60 percent of goods and produce at Tamura's is from the Mainland, Tamura said.
John Fujieki, owner of Star Markets, said his company usually tries to absorb extra costs.
"But sometime in the future, we just can't do it," he said. The surcharge has been raised "quite a few times, but what are you doing to do when fuel costs go up? I think we're all in the same boat."
Like Tamura's, about 50 to 60 percent of Star's inventory comes from the Mainland.
A representative from M. Dyer & Sons, which handles residential and military moves, said the cost will not be immediately passed on to consumers because of contracts set up with various customers.
City Mill is just going to have to be more efficient to deal with the extra costs and still be competitive, said Kirk Knapp, City Mill's general manager for retail.
"We have to absorb what we can absorb and try to find ways to cut costs and other ways to stay competitive," he said. "We have to find ways to continue to be competitive no matter what the increase in costs are. ... Whatever you do, you just have to do it more efficiently."
Matson normally burns 1.9 million barrels of fuel a year, so every $1 increase in the price per barrel means a $1.9 million increase in annual operating costs, Matson said in a letter to its customers yesterday.
Matson also has had to deal since June with labor shortages in Southern California, the company said. To minimize the impact on services, Matson says, it has deployed two reserve vessels at no additional expense to customers and is accelerating the transit time for Southern California-bound vessels.
"Both initiatives involve higher than normal fuel consumption and its related expenses," Matson said.
Brian Taylor, vice president and general manager for Horizon's Hawai'i and Guam division, said that since the surcharge was last raised in June, bunker oil prices have risen more than 9 percent.
"We are very concerned about continued escalation in bunker prices because of the current trend that we all see in crude oil," he said. "There just seems to be so many factors affecting fuel prices right now and it's such a huge component of the cost of our operation. We don't have a choice at the moment but to pass this cost along. ... We waited as long as we could. Once it started to get over $50 a barrel and stay over $50 a barrel, we couldn't hold off any longer."
Both Horizon and Matson officials said they will monitor fuel prices and make appropriate reductions and adjustments in the surcharges.
Reach Lynda Arakawa at larakawa@honoluluadvertiser.com or at 535-2470.
