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Shipping & Transportation Outlook for 2011 & Beyond

High fuel costs challenge shippers and transporters to keep supply lines open to Hawaii

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When the ancient Polynesians crossed the vast Pacific to land in the Hawaiian Islands, they brought with them food, plants, animals and implements to settle into a new life on these then uninhabited islands. Ever since, crossing the expanse of ocean with goods and moving them from ports continues to make possible the quality of life and standard of living in these Islands. From perishable medicines, specialty foods and family pets to automobiles, steel girders and massive wind turbine blades to produce clean energy, we rely on air cargo planes, container and cargo ships, barges and truck fleets to bring goods to us in a timely manner.

That is no small feat, as Hawaii is the most isolated population center on the face of the earth. It is 2,390 miles from the nearest state, California; 3,850 miles from Japan; 4,900 miles from China; and 5,280 miles from the Philippines. Today’s shipping and transportation industry is also subject to oversight, monitoring and protection by sometimes controversial local government regulations and federal statutes that regulate maritime commerce in U.S. waters and between U.S. ports. Hurricanes and adverse weather, shipping strikes and, in recent years, the high cost of fuel poses challenges to the smooth transport of goods to our island state. Kamaaina residents know well that bags of rice, toilet paper, cans of Spam and batteries will be cleared from store shelves by anxious residents when calamities strike that can prevent necessities from reaching our shores.

As Hawaii continues to recover from the recent recession, what are some of the major current trends and developments in the local shipping and transportation industry that can affect your business? Here is what some leading industry experts are saying about the kinds of developments that are happening in this critical lifeline that sustains our island economy:

“The worst of the economic downturn
is hopefully behind us, so we should
see a steady increase in economic
activity moving forward.”
-Chuck Patton, Senior VP, Pasha Hawaii

Pasha Hawaii:

“From our perspective, the worst of the economic downturn is hopefully behind us, so we should see a steady increase in economic activity moving forward,” says Chuck Patton, senior vice president, Pasha Hawaii. The recovery in Hawaii, like the U.S. overall, will be slow, which has been reflected in shipping volumes being down substantially from a few years ago.

“Meanwhile, costs are steadily going up, primarily due to increased fuel prices and regulatory mandated environmental upgrades,” adds Patton, who nevertheless remains optimistic that future expansion of the Hawaiian economy should produce opportunities for everyone.

Pasha recently entered Hawaii’s interisland cargo shipping as a result of a September 2010 interim order issued by the state Public Utilities Commission (PUC) for a 14-day interisland service test period to end December 31, 2013. In February 2011, its initial interisland shipment began from Honolulu to Kahului and Hilo, then on to San Diego before returning to Honolulu. The biweekly service was launched with the loading of vehicles and oversized equipment on the 579-foot roll-on, roll-off MV Jean Anne and signaled the end of a 50-year state-regulated monopoly on the interisland cargo trade, according to the Honolulu Star-Advertiser.

“Since competition in the (inter-island) shipping business has now become a major factor with Pasha entering into the marketplace, with all things being equal among the shipping companies, customer satisfaction will be the deciding factor in the consumer decision-making,” says Reggie Maldonado, general manager of Pasha Hawaii.

The company’s decision to seek a PUC license was based on customers expressing the need to transport vehicles of all dimensions and oversized cargo in a fully-enclosed ship on a regular basis. Much of interisland water transport is done by barges. As the first and only Pure Car Truck Carrier (PCTC), Pasha’s MV Jean Anne serves the Hawaii/Mainland ocean trade lane, which transports cars, motorcycles, boats, and oversized equipment shipped by the company. In fall 2013, Pasha’s 692-foot MV Marjorie C, a combination container and roll-on/roll-off vessel is scheduled to enter service on the Mainland to Hawaii trade route on a fortnightly basis. It will provide the only regularly scheduled direct calls to Kahului and Hilo for both Ro/Ro and container shipments.

“Pasha Hawaii’s entire organization
was founded on the principle that
customer satisfaction and
value-added services are, and
will always be, our top priority.”
-Reggie Maldonado,
General Manager, Pasha Hawaii

“Today, our customers have more options, and we have more competition than ever before,” says Maldonado. “Pasha Hawaii’s entire organization was founded on the principle that customer satisfaction and value-added services are, and will always be, our top priority. Pasha’s end-to-end shipping solutions are tailored to the unique requirements of its customers. Innovation and dedication to customer satisfaction are hallmarks of Pasha’s reputation and this philosophy is the basis of our road map for the future.”

“We continue to provide very
consistent and on-time service
of high quality to our local
business customers who rely
on Matson’s delivery of goods
for their customers.”
-David Hoppes,
Senior VP of Ocean Services, Matson

Matson:

Serving Hawaii since 1882, Matson is immediately recognizable to island residents as Hawaii’s premier ocean carrier. The kamaaina company, a subsidiary of Hawaii-based Alexander & Baldwin, is unique in the Mainland-to-Hawaii ocean transport service in that it does not exclude any commodity destined for our island shores. In the 1950s, its introduction of containerization revolutionized shipping service to Hawaii and the Pacific. And it has weathered the ups-and-downs of Hawaii’s economy for nearly 130 years.

Hawaii has been a bright spot for Matson to date in 2011. Dave Hoppes, senior vice president of ocean services for Matson, says the company is seeing a small uptick in freight traffic to the islands, reflecting the state’s modest recovery. In August, the company reported three consecutive quarters for increased container volume.

“For recovery to be significant, we need to see residential investment in the Islands, in single family homes, etc.,” says Hoppes. Major housing development will drive the construction industry’s need for labor and for building materials that need to be brought in from the Mainland.

“The high cost of fuel remains an ongoing issue and a significant component of the cost of shipping to Hawaii,” says Hoppes. The cost of fuel is 10 times higher today than as recent as 2002. With the decline of the state’s large sugar and pineapple industries, eastbound shipping to the Mainland has shrunk since the 1970s when every three westbound loads to Hawaii saw one ship sailing back to the West Coast. Today, the ratio is 10 westbound for one eastbound.

Begun in 2006, Matson’s China service was scaled back in August, but will continue to serve China with weekly sailings using five company-owned vessels. The service originates on the West Coast then comes through Hawaii and Guam on its way to China, before returning to Long Beach, California.

“We understand that our service is woven into the very fabric of Hawaii’s economy and have a responsibility to carry what’s needed in Hawaii. We continue to invest in new ships and to find ways to lower costs and help the community, such as for the Big Island’s cattle industry, recently hard-hit by drought conditions,” says Hoppes. “We continue to provide very consistent and on-time service of high quality to our local business customers who rely on Matson’s delivery of goods for their customers.”

Aloha Cargo Transport:

If your company needs to transport something large from the Mainland and doesn’t need it fast, transporting it by barge may be the most economical way to get it to Hawaii. It may take an average of about 12 days and won’t have temperature or environmental controls. As one of five open ocean cargo carriers serving Hawaii, Aloha Cargo Transport (ACT) has provided such a cost-effective alternative to the high-cost but faster steamship liner service from the Pacific Northwest to Hawaii since 1987. A division of Northland Services, Inc., one of the nation’s most respected blue-water barge transportation companies, with more than 25 years of service to Alaska and the Pacific Rim, ACT utilizes top technology design barges and powerful towing vessels to transport large, non-perishable and durable commodities to the Islands.

“In the current economy, like other cargo carriers, we’ve had to reduce costs and limit services, but have not sacrificed quality to our business customers in Hawaii,” says Richard Maxwell, vice president of Hawaii operations for Northland Services, Inc. 

“We are part of the supply chain to the
Islands and have to be partners with our
clients to weather the slow recovery of the
state’s economy.”
-Richard “Max” maxwell,
VP of Hawaii operations,
Northland services, inc.

“We are the life support to Hawaii businesses that provide vital goods and services to tourism, military and state and local governments. We are part of the supply chain to the Islands and have to be partners with our clients to weather the slow recovery of the state’s economy.” Overall, the Hawaii service has been a growth market for the company. It has invested in high tech capabilities to handle logistics and has added new vessels.

ACT maintains a regular sailing schedule between Honolulu and Seattle and serves Kauai, Maui, Hawaii and Molokai via a connecting inter-island barge carrier schedule from the Honolulu hub. As a cost-effective, common carrier barge service, it can move heavy equipment and vehicles, construction materials, commercial and pleasure boats, industrial and agricultural chemicals, heavy equipment, household goods and scrap, among other durable goods. It has also moved astronomy equipment for an observatory on the Big Island and recently, large equipment and materials for movie sets for filming in Hawaii.

At the end of 2011, ACT expects to have fully operational an improved Cargo Track system to provide clients with cost analysis and logistic information for business planning, says Maxwell.

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