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The Honolulu Advertiser
Posted on: Saturday, November 18, 2006

Matson raises its basic rate, handling charge

By Lynda Arakawa
Advertiser Staff Writer

The Matson container ship Lurline is docked in the Kapalama Channel with Honolulu Harbor and Aloha Tower in the background as two tug boats move into position before sailing.


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Hawai'i residents may see higher prices for many goods early next year as the state's largest shipping company raises its rates.

Matson Navigation Co. said yesterday it will raise its basic rate by an average of 3.3 percent and increase its terminal handling charge beginning Jan. 1.

The company said the increases will add about 10.6 cents to a 20-pound bag of rice or a penny to a head of lettuce, and that they are needed to help cover higher operating costs and pay for recent upgrades to its fleet.

The increases follow a series of hikes in shipping costs. This will be Matson's fourth basic rate increase in four years, during which fuel surcharges also grew. The increases will also come just a few months after Matson granted Hawai'i businesses some relief by reducing its fuel surcharge for the first time in years.

"Obviously it's going to have an effect; it's going to increase prices to the consumer," said David Kunisaki, director of purchasing for Armstrong Produce Ltd., whose customers include supermarkets and restaurants. "As a businessperson, we end up having to pass it on to our customers. But we're also consumers, so we also feel the impact at the register."

Kunisaki said he was caught off guard by the amount of Matson's increase, and questioned whether it was necessary.

"Frankly speaking, I was a little appalled that the increase was as substantial as it was," Kunisaki said. "I just have a hard time understanding the need for that. ... I don't think anybody likes it, but really, nobody has any choice. They've pretty much got us over the barrel."

Foodland spokeswoman Sheryl Toda, however, said the shipping cost increases won't be substantial enough to affect the company's retail prices.

Matson will raise rates for its Hawai'i service by $100 per westbound container and $50 per eastbound container beginning Jan. 1. Matson also will raise its terminal handling charge by $150 per westbound container and $75 per eastbound container on Jan. 1. The current terminal handling charge is $325 westbound and $165 per eastbound container. Matson began assessing the terminal handling charge in 2003.

"This rate increase will help offset rises in operating costs and support a number of investments in our Hawai'i service," said Dave Hoppes, senior vice president, ocean services. "Given the essential role ocean transportation has in supporting Hawai'i's economy, Matson has made its fleet replacement program a high priority in recent years."

Hoppes said the company has invested over $500 million since 2002 in four new, more-fuel-efficient container ships that "will provide Hawai'i with modern, reliable service for decades to come." He said Matson is also investing in new container equipment, information technology and enhancements to its Neighbor Island service.

"This rate increase is consistent with our longstanding philosophy of implementing modest, incremental increases annually in order to reinvest in our Hawai'i service," Hoppes said.

Matson's terminal handling charge was first implemented in 2003 and is designed to recover a portion of the costs associated with moving cargo through terminal facilities on the West Coast and in Hawai'i, the company said.

"Terminal handling costs comprise approximately 40 percent of Matson's operating expenses and today represents nearly $300 million annually," Hoppes said. "In the past five years, terminal handling costs, which are driven by many factors that are outside of our control, have risen by 34 percent. Matson continues to absorb the vast majority of these increases, but needs to pass on some of the costs to our customers. Matson recognizes that this year's increase in its terminal handling charge is higher than past years, but knows it is a necessary measure to help offset cost increases primarily resulting from increased labor costs. Some of the increased costs actually went into effect in July 2006, with another increase scheduled for July 2007."

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com.