Pacific Maritime Magazine - Marine Business for the Operations Sector

Hawaii's Shipping Services See an Upturn

Trade with Alaska and Hawaii


With the christening and inauguration last year of the Marjorie C, Pasha Hawaii now has four US-flag container ships, and the company's recent purchase of the trade lane assets of Horizon Lines has doubled its US-flag fleet size.

Although low oil prices and a difficult political environment have caused components of Alaska's maritime industry to seek other avenues of wealth creation, the economic outlook in the other non-contiguous US state – Hawaii – seems to be sunnier.

Economically speaking, Hawaii last year was seated in between Alaska, which has suffered it's difficulties in the past year, and the west coast mainland, which has seen robust, and sometimes record-breaking success in the past 12 months regarding cargo volumes.

Hawaii isn't hurting for business like Alaska, but at the same time, the region overall hasn't had a blockbuster year like the ports in the Los Angeles Basin and Puget Sound. Perhaps the best example of this is the amount of 2015 intrastate-only cargo volume reported earlier this year by freight forwarder Young Brothers Ltd., a company that has provided cargo shipping services in the area since 1900.

Young Brothers, which provides about a dozen weekly port calls from Honolulu to six other island ports, said in February that its intrastate cargo shipments rose 1.1 percent during calendar year 2015.

The increase, however, was mainly due to a 2.7 percent boost in the last quarter of 2015 compared to the same three-month period in 2014.

"During the fourth quarter of 2015, neighbor islands experienced the year's largest increase in overall cargo volumes," Young Brothers Vice President Roy Catalani explained at the time. "This relatively strong quarter provided the push that put the year slightly in the positive."

Things started off slowly for Young Brothers in the first quarter of last year, but with each successive quarter, things improved.

Volumes fell in the first quarter with a year-on-year decrease of 1.9 percent, followed by gradual growth of 0.8 percent and 1.5 percent in the second and third quarters, respectively. Then came the 2.7 percent jump in the fourth quarter.

Although Young Brothers' 1.1 percent annual volume increase is both figuratively and literally a positive, the company's 2015 cargo numbers were about 20 percent lower than the historic peak of 2007, just before the Great Recession, which struck at the end of '07 and carried over through most of the next two years.

Automobile shipments were among the top reasons for Young Brothers' annual volume increase, according to the company, particularly a strong fourth quarter surge in vehicle shipments led by car dealerships.

A combination of sectors and projects also contributed to higher cargo volumes in the fourth quarter, YB said, such as growth in construction-related shipments, including a highway construction project and hotel renovations on the islands.

Food shipments were flat to down for the year, but trended slightly up in the last quarter, in part due to a large food distributor changing its shipment method to use more interisland shipping.

Fourth quarter shipments of recyclables fell year over year, continuing a pattern seen earlier in 2015. The cause, Young Brothers has said, is likely due to declines in scrap metal values.

Also in 2015, statewide agricultural volumes ended the year down 1.9 percent, something YB partially attributed to challenging weather conditions. In the last three months of the year, statewide agricultural cargo volume decreased by 3.6 percent from the same period the year before.

Agricultural volume, by definition, only includes cargo that qualifies for Young Brothers' island agricultural product discount of 30 to 35 percent, which applies to locally grown agricultural products.

While things were trending just slightly upward regarding intrastate cargo on the Hawaiian Islands, when it comes to interstate cargo – shipping between Hawaii, the mainland US and elsewhere – things were looking bright in 2015, at least for one company that's made a concerted effort to dominate the market, Honolulu-based shipping company Matson Inc.

Matson reported net income of $103 million last year, compared with $70.8 million in 2014. Consolidated revenue for the full calendar year was $1.88 billion, compared with $1.71 billion in 2014.

When it specifically comes to the company's Hawaii operations, Matson managed to move about 149,500 containers through the Aloha State's seaports last year, an 8.1 percent jump compared to the 138,300 units shipped during the previous calendar year.

However, unlike Young Brothers' intrastate shipping figures, the number of automobiles moved by Matson was down. The company shipped about 70,000 automobiles through Hawaii, compared with 70,600 in 2014, a drop of eight tenths of a percent.

But despite that, Matson's overall ocean transportation revenue increased 17.2 percent last year to $219.6 million, due in part, the company says, to higher container volume and yield in Hawaii.

Matson also reported that its ocean transportation operating income increased $56.7 million during 2015 compared with 2014, with the boost also attributed in part to container volume and yield improvements in Hawaii.

"2015 was an exceptional year for Matson," Matt Cox, the company's president and Chief Executive Officer said upon the release of the financial numbers. "Financially, it was the best year in our history."

"In 2016, we expect to continue to deliver strong operating results, although modestly lower than the record level achieved in 2015," Cox predicted, stating that the integration of its Alaska operations will remain a focus this year as it continues to progress.

Partially offsetting 2015's favorable operating income items, however, were higher vessel operating expenses related to Matson's deployment of additional vessels in the Hawaii trade, as well as costs related to a settlement with the State of Hawaii regarding the accidental spill of 230,000 gallons of molasses into Honolulu Harbor in September 2013.

Under the settlement, Matson paid $13.3 million in compensation costs and environmental remediation during 2015.

Another major player in Hawaii's maritime industry, Pasha Hawaii, says it has seen relatively smooth sailing since it's parent company, Northern California-based The Pasha Group, bought the trade lane assets of shipping and logistics company Horizon Lines.

The purchase, which was announced in November 2014 and became official last May, resulted in Pasha expanding its service between Hawaii and California about 11 months ago.

Young Brothers provides about a dozen weekly port calls from Honolulu to six other island ports, and says its intrastate cargo shipments rose 1.1 percent during calendar year 2015. Photo courtesy of Young Bros. Young Brothers provides about a dozen weekly port calls from Honolulu to six other island ports, and says its intrastate cargo shipments rose 1.1 percent during calendar year 2015. Photo courtesy of Young Bros.

"Pasha Hawaii's expansion through the acquisition of Horizon's Hawaii trade-lane businesses made sense," Pasha Group President and CEO George Pasha IV told Pacific Maritime. "Pasha Hawaii now has a greater opportunity to grow our business and better serve Hawaii's businesses and communities. Combining the two businesses allows us to more effectively serve our expanding customer base."

The purchase resulted in Pasha doubling its number of U.S.-flagged ships and boosting its number of Hawaii-based employees from 20 to more than 600.

"Hawaii has always been a very important market for us, and purchasing Horizon Lines' Hawaii operations allowed us to expand our current offerings to better serve our customers," Pasha IV said. "We now have four US-flag container ships. This provides our customers with increased cargo flexibility and capacity. We also expanded our ports to include Los Angeles and Oakland, and more than doubled the frequency of our sailings."

Pasha IV also said he expects customer demand to remain strong, a belief he bases on Hawaii's current low unemployment rate and increased activity within the construction industry.

"Hawaii is at the beginning of a construction boom, generated partly by government-supported projects like rail, but more importantly by the overall economy itself," he said. "Our biggest opportunity will be to invest in new ships to enhance our level of service to the Hawaii market for Pasha family generations to come."


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