Pacific Maritime Magazine - Marine Business for the Operations Sector

Trade with Alaska and Hawaii

From Los Angeles to Florida, millions of dollars are being invested in raising cranes, deepening berths and other infrastructure projects at ports throughout the US in an effort to retain and capture a larger slice of the market share.

 

April 1, 2018

Overseas Boston is delivering jet fuel to the Port of Alaska. Photo courtesy of the Port of Alaska.

Ports in Alaska and Hawaii are no different. The youngest states in the union are heavily investing in their infrastructure, because for both, the future depends on it.

In the newly rebranded Port of Alaska, officials are racing to renovate its port within the next 10 years before a natural disaster destroys the vital hub that supports most of the state population.

In Hawaii, officials are embarking on a massive harbor master plan that will redefine the ports in the Aloha state for years to come.

Honolulu-based carrier Matson Inc. recognizes the business advantages of Alaskan and Hawaiian ports and has heavily invested in both areas.

"As a proud US carrier, Matson has for 135 years served as a critical lifeline to the islands of Hawaii, providing frequent, just-in-time service that the island economy relies on to keep inventories of everyday consumer goods on shelves," said Keoni Wagner, director of corporate communications for Matson. "The Alaska trade is very similar, relying on frequent service as a critical supply line for the vast majority of consumer goods, construction materials, equipment" and other services.

Wagner said Matson invests for the long term and anticipates modest growth in both economies over time.

"As the focal points for supplies coming into these two remote states, the ports we serve are infrastructure that supports our mission to serve these communities," he said.

Here's a look at what's happening in Alaska and Hawaii.

Alaska

There's an irony to the Port of Alaska's infrastructure predicament.

In 1964, an earthquake that generated tsunamis leveled every port in Southcentral Alaska except for the Port of Alaska – then called the Port of Anchorage, because its inlet location protected it from the tsunami.

And because it was the only functioning port at the time, the Anchorage port became the dominant transportation hub and the dominant population center.

"Basically Anchorage became the heart of Alaska," said Jim Jager, spokesman for the Port of Alaska. "It was an accident of tectonic movement."

Today, the Port of Alaska is the biggest inbound cargo port in the state with more inbound cargo capacity than every other port in Southcentral Alaska combined.

But now the port is in earthquake jeopardy.

The port's 57-year-old docks and 1,423 corroded support piles are not expected to last the decade or survive another significant earthquake unless officials rebuild them.

After a failed attempt years ago to expand the port, officials are now moving forward with a more modest modernization project to replace the failing docks.

Plans for the project, which is expected to be more than $700 million and will be paid for by various funding sources - are underway to build new docks big enough to accommodate modern ships.

The port will start about 400 yards south of where current docks are and move north "so we will always keep more or less the same number of docks open and stay in business," Jager said. "And after about seven years when the dust settles, we should have a new dock that's about 400 yards south of our current dock, but 150 feet farther in the ocean. We'll have deeper berths."

The port is finalizing the design of the project to incorporate enhancements requested by TOTE and Matson.

Matson – which has twice weekly service between Tacoma, Anchorage and Kodiak and weekly service between Tacoma and Dutch Harbor – has infused more than $700 million in the last three years into the Alaskan market.

That includes purchasing Horizon Lines' Alaska operations in 2015 and Span Alaska in 2016. The company also spent more than $50 million to outfit its Alaska fleet and operations, including modernizing a container crane in Kodiak in 2015, and augmented its workforce there.

"Matson had long considered the Alaska trade as a logical extension of its Pacific network when the opportunity to acquire Horizon's operations arose," Wagner said. "As Matson had been to Hawaii for so long, Horizon had been a leading provider in Alaska for 50 years, and many of their customers were also our customers, so it was a natural fit. While Alaska's energy-driven economy has been tough for the last couple of years, we are bullish on its prospects and invested for the long term."

Construction on a new $150 million petroleum and cement terminal at the Port of Alaska is expected to start this summer, along with shoreside stabilization work to prevent erosion of the shore, harbor dredging and plumbing for the fuel dock and for the cement terminal. The port will also have to do about $13 million worth of dredging requested by the US Army Corps of Engineers to better support its long-term dredging maintenance.

The port hopes to build the dock the following summer and demolishing and reconstructing the existing petroleum and cement terminal to make way for first new cargo terminal, which will be 150 feet farther out towards the ocean.

"Basically what we're trying to do is move forward with replacing docks and do it the most optimal way possible," Jager said. "The project needs to balance timeliness, resiliency, operational efficiency and how much Alaskans are willing to pay."

When completed, the newly rebuilt port will be able to survive an earthquake bigger than the one that shook the state in 1964 and should last a minimum of 75 years, Jager said.

"If everything works out we'll get it all rebuilt before we have an earthquake that knocks it down," he said.

The project is essential to the state's economic vitality. About 90 percent of all Alaska inbound freight is marine cargo. Port of Alaska handles about half of the state's inbound marine cargo, some 3.5 million tons of fuel and freight annually, according to the port. And about half of that cargo is delivered to final destinations outside of Anchorage.

Port facilities handle 90 percent of all refined petroleum products distributed into Southcentral/Railbelt Alaska, including jet fuel used at Ted Stevens International Airport and Joint Base Elmendorf-Richardson, and liquid fuels for motor vehicles, power utilities, home-heating and other uses, according to the port.

"This is a mission critical project for the state, because basically most of the state's economy relies on the port of Alaska," Jager said. "You cannot have a major development of any type in most of the state that does not involve the port of Alaska."

Hawaii

The Aloha state is also moving forward on a whole slew of projects within its $500-million plus harbor modernization plan, which has been about a decade in the making.

The catalyst for the plan stemmed from a 2007 economic study that said "as high as the costs of harbor upgrades may seem, these costs pale in comparison to the multi-billion dollar impact of doing nothing."

According to the port, "the opportunity cost was then estimated to reach $50 billion by 2030 (in 2007 dollars); there is no feasible alternative to this plan."

Fast forward to late January, when officials broke ground on the Port of Honolulu's $448 million Kapalama Container Terminal, considered the state commercial harbor system's largest capital improvement project ever. The new deepwater terminal in Honolulu, which will feature an 84-acre cargo yard and 1,800 linear feet of new berthing space, is expected to be built in two phases and be done by 2022.

The new terminal will help ease congestion in Honolulu Harbor by allowing about 50,000 annual truckloads to move directly between the facilities and away from roadways.

"I'm proud to say the construction of the Kapalama Container Terminal Project is underway, and in four years we'll have a new state-of-the-art cargo facility that will allow us to consolidate cargo operations, enhance operational efficiencies and improve cargo handling capacity," Gov. David Ige said at the groundbreaking. "This will support our local economy while ensuring the continued flow of cargo to our communities through this distribution hub."

He added that several other modernization projects designed to enhance maritime operations throughout the state have infused more than $140 million into the local economy and generated job opportunities in construction, specialized trades, transportation and the maritime industry.

Matson is also key to Hawaii's Harbor Modernization Plan, which seeks to modernize berths in Honolulu Harbor to aid in the expansion of Matson's Sand Island Terminal, which serves as a hub where cargo destined for or coming from the neighbor islands is transshipped on Matson's inter-island barge system, Wagner said.

"As a member of the Harbor Users Group that worked with the state for 10 years to develop the plan, we feel (Hawaii's Harbor Modernization Plan) addresses needs in an equitable way and can't happen soon enough. Matson outgrew its footprint at Sand Island years ago and has been operating out of four different locations around the harbor. We look forward being able to expand our space and consolidate all our operations in the coming years."

"These investments in our Hawaii infrastructure underscore Matson's long-standing commitment to serving our communities with the most reliable, efficient and environmentally friendly operations in the islands for the long-term," Matson chairman and chief executive officer Matt Cox said in a statement earlier this year.

In early January, Matson announced that it would replace one of its smaller barges that served Hawaii's neighbor island ports with a bigger container barge capable of hauling 500 TEUs of diverse cargo.

It's the latest of a series of improvements Matson has made to its Hawaii service. The company is involved in a $60 million project to expand and upgrade its Sand Island terminal in Honolulu Harbor to prepare for the coming four new, larger container vessels starting in 2019. Those investments include the purchase of three new gantry cranes and modernizing three existing cranes.

Matson has also commissioned the building of two 850-foot long Aloha Class ships in Philadelphia that are expected to be delivered later this year and the start of 2019, according to the company. The ships, each capable of carrying 3,600 TEUs, will be Matson's biggest ships and faster than any vessel in the company's fleet.

This Horizon Lines vessel is carrying containers to Hawaii following the company's purchase by Matson in 2015. Photo courtesy of Hawaii Stevedores.

Rounding out Matson's efforts to renew its fleet is the company's decision to order two Kanaloa Class vessels from General Dynamics NASSCO in San Diego. These vessels, scheduled for delivery in late 2019 and mid-2020, will be hybrid "con/ro" – container and roll-on/roll-off – ships constructed on a 3,500 TEU platform that is 870 feet long and 114 feet wide. They will include an enclosed garage space for up to 800 vehicles, according to Matson.

"Our investments in new ships and terminal upgrades underscore Matson's commitment to maintaining its leadership in the market and will position us well to meet Hawaii's freight needs for decades to come," Wagner said.

In December, state transportation officials also celebrated Hilo Harbor's new Pier 4 cargo wharf, the Pier 1 cargo yard and passenger terminal improvements, all of which aim to augment operational space, make cargo handling more efficient and make the passenger terminal more comfortable for cruise passengers.

 
 

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