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The Honolulu Advertiser
Posted on: Saturday, March 11, 2006

Matson raising fuel surcharge

By Lynda Arakawa
Advertiser Staff Writer

Matson Navigation Co., Hawai'i's main ocean cargo carrier, says rising oil prices are forcing it to pass the cost on. A 3.5 percentage-point increase next month will add 2.6 cents to the cost of shipping a 20-pound bag of rice. The hike is Matson's second this year.

ADVERTISER LIBRARY PHOTO | February 2006

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Matson Navigation Co., the state's largest ocean cargo carrier, said yesterday a rise in oil prices has forced it to raise its fuel surcharge to 18.5 percent from 15 percent beginning April 2.

The fuel surcharge hike will be the second this year and follows three increases last year.

The increase will add 2.6 cents to a 20-pound bag of rice and 0.6 cents to a head of lettuce, Matson said.

Prices of most goods in Hawai'i will likely increase as many businesses will pass on higher shipping costs to consumers.

"The shame of it is this: When I hear from my freight forwarder that my cost per cube is going up, I automatically put it into my proposals and my cost to my customers," said Greg Liu, owner of Design Trends Construction. "So it hurts me in the sense that it makes my bids higher. It makes everything higher, but it's just the cost of doing business here. You don't have a lot of choice. ... In essence it's really hurting everybody in Hawai'i."

But Liu said the cost of gas prices has overshadowed the cost of shipping for his company.

"With the price at the pump the way it is ... that's probably affected me more than anything else," he said. "I've got guys that have to drive to job sites, I've got trucks and I've got vehicles, and that has probably killed me more than the cost of ocean freight increases.

"Does it surprise me? No. I've lived here all my life. Hardly anything as far as cost increases surprises me anymore. It is a shame, though."

Matson said its fuel costs have grown 71 percent in the past 12 months. The company also said the price of bunker fuel, used in ships, rose 17 percent in the last three months, with the fuel surcharge recovering only a portion of the increase.

"While this 3.5 (percentage point) increase represents a very significant increase, no transportation company can ignore the serious impact of record high fuel prices and the volatility of the current world oil market," said Dave Hoppes, senior vice president, ocean services. "Fuel consumption is an unavoidable and significant component of our operating costs, with every dollar increase per barrel adding over $2 million in annual expenses."

Matson competitor Horizon Lines is reserving comment on its own plans until Matson files the surcharge with the federal Surface Transportation Board, said Horizon spokesman Ku'uhaku Park. Horizon often matches Matson's surcharges.

"Fuel prices have had a cumulative effect on our entire industry," Park said in an e-mail statement. "Not only does it cost more to run our vessels, but it also costs us more to run all of our machines used to work our vessels on the land side ... Compounding this further is that our transportation vendors, like truckers, railroads and connecting carriers are charging us fuel surcharges, or just straight out raising their fees to cover their own increased fuel costs."

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com.