Matson sees gold
in China trade

The shipper expects $100M a year
from the service and also will
double its vehicle-transport fleet

Matson Navigation Co. expects to generate $100 million in annual revenue from its new China service and also plans to double the number of combination vehicle-containerships in its fleet to four in as it competes with Horizon Lines and vehicle transporter Pasha Hawaii Transport Lines LLC.

The ocean transportation company's outlook was contained in prepared text for Matson President and Chief Executive Jim Andrasick that was mistakenly sent out to Hawaii media yesterday in an e-mail announcing a June 28 press conference.

Matson's two additional roll on-roll off/containerships will come from the conversion of vessels that are deployed in Matson's Guam alliance service with American President Lines Ltd.

That 10-year alliance ends in February and will be replaced by the new China, five-ship service that will begin in Long Beach, Calif., and include stops in Hawaii, Guam and in the Chinese ports of Ningbo and Shanghai before sailing directly back to Long Beach.

Andrasick said in the prepared comments that Matson, a subsidiary of Alexander & Baldwin Inc., anticipates moving approximately 50,000 containers from China annually.

The ships that will be converted will join the SS Matsonia and SS Lurline as combination roll on-roll off/containerships, along with one dedicated roll on-roll off vessel, the SS Great Land. With the conversions, each of the ships will have a capacity of 1,000 vehicles and will bring Matson's annual vehicle capacity to 80,000 from 16,000 in 2003. The additional ships will allow Matson to offer vehicle transport service twice a week.

"Matson recently reached new multiyear agreements with Ford Motor Co. and General Motors for the carriage of their vehicles to Hawaii," Andrasick said.

In addition, Andrasick said, Matson has multiyear agreements with Dollar Thrifty Group, BMW, Mercedes Benz, Toyota and Nissan.

"Automobiles certainly are and have been an important part of Matson's business, and in order to remain competitive, it's necessary for the company to take advantage of any strategic advantages they have over Pasha," said analyst Jamelah Leddy of Seattle-based McAdams Wright Ragen. "Offering service twice weekly puts Matson in a position where it can offer flexibility and timing. One of the issues with respect to cars in Hawaii is if you're a rental agency or a dealership, you don't want extra vehicles too soon because there's not land to park them on."

Pasha Hawaii, which began San Diego-Hawaii service in late March, can carry up to 3,000 vehicles in a totally enclosed vessel. Brian Black, managing director for Pasha Hawaii, said he's not concerned by the additional competition.

"There's obviously a reason why they're doing it," he said. "It's pretty much evident that the marketplace for a long time has needed the type of vessel we have. Our customer response has been very, very positive."

Black wouldn't disclose how full the Pasha vessel, the MV Jean Anne, has been on its San Diego-Hawaii leg (the fullest of the two legs), but he said, "We are achieving our business plan."

"There's tremendous construction and building taking place in the islands, and that fits very, very well with ro-ro vessels," Black said.

Andrasick is scheduled to speak at next week's press conference in conjunction with the inaugural voyage of a new Matson containership, the MV Manulani, the third of four ships built for Matson by Kvaerner Philadelphia Shipyard.

The Manulani and the other ship under construction cost Matson a total of about $315 million.