Pacific Maritime Magazine - Marine Business for the Operations Sector

Trade with Hawaii: Growth Marked by New Vessels Entering Hawaii Service

 

Pasha

Pasha Group's Marjorie C made her maiden call to Hawaii in May.

The 10 commercial ports that make up the Hawaii harbor system may never be ready to challenge the major ports on the Mainland as far as traffic volumes go, but they aren't exactly sitting idly by these days.

Over the past year, there has been growth in the region and some significant events that have taken place have, to an extent, reshaped a sizable portion of the maritime industry landscape.

One of the biggest regional developments over the past 12 months was ocean shipping and logistics company Horizon Lines selling its Hawaii trade lane assets to Pasha Group as part of Horizon's dissolution as a company.

It was last November when Horizon, which had operated a Hawaii circuit for about a decade, announced that it had agreed to sell its Hawaii operations, including four Jones Act container ships, to Northern California-based Pasha.

"Hawaii has always been a very important market for us, and purchasing Horizon's Hawaii operations allowed us to expand our current offerings to better serve our customers," Pasha Hawaii spokeswoman Laurie LaGrange told Pacific Maritime Magazine.

Pasha's ties to Hawaii actually date all the way back to World War II. It was then when the company provided vehicle storage services in San Francisco for troops deployed to Hawaii. Now the $141.5 million purchase of the Horizon Lines assets, which became final in late May, has significantly boosted Pasha's standing in the region.

"Acquiring Horizon's Hawaii trade-lane businesses made sense," LaGrange explained. "It will nearly double our annual revenue going forward. The acquisition also provides us with the opportunity to grow our business in a very important market, and like Pasha Hawaii, Horizon and its subsidiaries have strong ties to Hawaii and the Mainland, and are aligned with our integrated shipping and logistics model. Combining the two businesses allows us to more effectively serve an expanded customer base while maintaining our customer service philosophy."

Currently, Pasha Hawaii has four US-flag container ships, with three of them operating alongside the dedicated roll-on/roll-off vessel Jean Anne and the combination container and roll-on/roll-off vessel Marjorie C, which was introduced this past May.

Pasha Group has also expanded its ports-of-call to include Los Angeles and Oakland, plus has more than doubled the frequency of its shipments.

Pasha's assets purchase also included three Horizon subsidiaries: Hawaii Stevedores Inc.; the California-based operations of Sea-Logix LLC, which provides trucking services; and Sunrise Operations, a subsidiary that includes Horizon's Hawaii trade-lane vessels and employees.

Adding Hawaii Stevedores provides Pasha Hawaii with the experienced manpower to load and offload cargo, LaGrange said, while Sea-Logix provides the company with increased intermodal services for cargo delivery.

Phenomenal growth for the company has come with the acquisition of Horizon Lines' Hawaii assets, LaGrange said.

"Pasha Hawaii basically went from a two-ship company with 20 Hawaii-based employees to a six-ship entity with 700 employees," she said. "We expect continued growth. The Hawaii economy is doing well and we will be prepared with our expanded fleet and integrated logistics model to meet this increased demand."

At the same time that Pasha Group was buying Horizon Lines' Hawaii assets, another shipping company, Honolulu-based Matson Inc., was purchasing Horizon's Alaska holdings.

Matson acquired Horizon's stock earlier this year for 72 cents per share, or $69 million, and repaid Horizon's outstanding debt, for a total transaction value of about $470 million. It was a strategic purchase meant to further the company's reach.

"Acquiring the Alaska operations gives us an opportunity to leverage our platform in a very similar and complementary business operation, as well as a natural geographic extension in the Pacific," Matson spokesman Keoni Wagner told Pacific Maritime. "There also happens to be significant overlap with our Hawaii customer base."

That being said, there's no overlap between the Alaska and Hawaii locations' operations, according to the company.

"Aside from the occasional ship substitution," Wagner said, "they are separate operations."

And although Matson significantly increased its Arctic-area holdings with the Horizon deal, the company's largest operations have been, and remain, in Hawaii.

"We recently increased our Hawaii schedule from 10 to 11 ships to accommodate increased demand," Wagner revealed.

The company also plans to take delivery of a couple of new ships in about three years.

On Oct. 1, Matson announced the start of production on two new "Aloha Class" containerships designed specifically for Hawaii service.

Matson subsidiary Matson Navigation Co. has inked a contract with Aker Philadelphia Shipyard to build the new ships for an aggregate price of $418 million, with delivery expected in the third and fourth quarters of 2018.

The first of the two new ships is to be named after the late Sen. Daniel K. Inouye (D-Hawaii), who was a longtime supporter of the US maritime industry.

The 850-foot long, 3,600 TEU vessels are to be Matson's largest ships and among the largest Jones Act containerships ever constructed. They're designed to operate at speeds in excess of 23 knots, and incorporate a number of environmentally friendly features, including a more fuel efficient hull design, dual fuel engines that can be adapted to use liquefied natural gas, environmentally safe double hull fuel tanks and fresh water ballast systems.

"These new ships are the future for Hawaii shipping and will bring a new level of efficiency and effectiveness to our service," Matson President & CEO Matt Cox said, adding that the investment in new technology underscores Matson's long-term commitment to Hawaii and its desire to serve the islands "in the best, most environmentally friendly way."

Another of the big players in the Hawaiian Islands' maritime industry is freight handling and transportation company Young Brothers Ltd., which has provided cargo-shipping services in the area since 1900.

Young Brothers, which has about 340 employees across Hawaii, is an intrastate-only water carrier providing 12 weekly port calls from Honolulu to the state's neighbor island ports: Hilo, Kawaihae, Kahului, Kaumalapau, Kaunakakai and Nāwiliwili.

Although interstate shipping may be on the rise, Young Brothers' slice of the intrastate shipping pie has remained steady over the past year, according to company data.

The shipper, which is a subsidiary of Seattle-based Foss Maritime, says that its intra-state cargo volumes between Honolulu and the six neighbor island ports were basically flat during the first half of 2015: they slipped half a percent compared to the same six months in 2014.

During the six-month period, only two of the six neighbor island ports experienced an increase in volume for the first half of the year, Young Bros. says. Cargo volume increased at Kawaihae by 11.2 percent and at Moloka'i, barely rising by 0.2 percent.

However, Maui volume dropped 1.5 percent; Hilo was down 2.9 percent; Kaua'i, 0.5 percent; and Lāna'i, 22.1 percent.

The good news is that also during the first half of the year, agricultural exports rose by double digits at three of the six ports. Honolulu was up 30 percent; Kawaihae, up 28.2 percent; and Kaua'i, 10.9 percent.

But agricultural cargo also declined at two ports during the same period, including Maui, down 3.6 percent, and Hilo, down 18.9 percent. Moloka'i's agricultural exports were virtually unchanged, barely slipping 0.1 percent.

Young Brothers' agricultural volumes apply to locally grown agricultural products, which qualify for the company's island product discount of 30 to 35 percent.

In calendar year 2014, the story was pretty much the same for the company as far as intra-state cargo goes: cargo volumes were up by just 0.5 percent compared to 2013 shipments, according to Young Bros., with three neighbor island ports experiencing an increase in cargo shipments for the 12-month period ending Dec. 31, 2014.

Hilo was up 3.3 percent; Kawaihae, up 0.5 percent; and Lāna'i, up 28.6 percent. Meanwhile, three ports experienced a decline in cargo volume for the year: Maui, down 1.8 percent; Kaua'i, also down 1.8 percent; and Moloka'i, down 5.3 percent.

Also for the 12-month period ending last December, five ports increased agricultural exports: Honolulu, which was up 2.4 percent; Hilo, up 4.0 percent; Kawaihae, 40.9 percent; Kaua'i, 19.8 percent; and Moloka'i, 6.5 percent.

Only Maui experienced a decline in agricultural exports, dropping by 11.1 percent.

But despite flat shipping volumes, Young Bros. has remained in the thick of things in the past year. One project it has had a hand in for the past few years took a step forward in late August, when the Young Bros. facility at the Port of Honolulu began hosting a maritime hydrogen fuel cell project to test a hydrogen-fuel-cell-powered generator as an alternative to conventional diesel generators.

Planning for the Maritime Hydrogen Fuel Cell project began in late 2012 with a study that determined that hydrogen fuel cells could replace diesel generators in providing auxiliary power on board and to ships at berth.

The U.S. Department of Energy's Fuel Cell Technologies office and the US Maritime Administration are funding the six-month deployment of the hydrogen-fuel-cell-powered generator, which is comprised of four 30-kilowatt fuel cells, a hydrogen storage system and power-conversion equipment packaged in a 20-foot shipping container.

Ryan Catalani

Hawaii's Young Bros., which has about 340 employees across Hawaii, is an intrastate-only water carrier providing 12 weekly port calls from Honolulu to the state's neighbor island ports.

The generator has enough energy to power 10 refrigerated containers for 20 continuous hours of operation and is already providing power to refrigerated containers on shore and will eventually power the same refrigerated containers on Young Brothers' barges that distribute goods to the other Hawaiian islands.

Following the six-month test, the project team intends to analyze the project's successes and challenges, including the operating and cost parameters needed to make a business case at other seaports.

"The long-range goal is to develop a commercial-ready technology that can be widely used at other ports," said Joe Pratt of Sandia National Laboratories, the research and development entity overseeing the project.

"The project team sees a strong market need and desire for a fuel cell solution, not only at maritime ports but also for users who aren't connected to a grid," Pratt said.

So while the 10 commercial harbors making up the Hawaiian port system may not be ready to challenge the major Mainland ports as far as traffic volumes go, they still have more than enough activity swirling around them at the moment to keep things very interesting.

 
 

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