Matson’s new ships
to contain cargo cost

Each of the 2 vessels will trim
$6 million a year, the shipper says

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Star-Bulletin staff and wire

Matson Navigation Co.'s recent purchase of two new diesel-powered container ships should help keep costs manageable as the cargo shipping company confronts future challenges, the company's president and chief executive said yesterday.

Matson, Hawaii's largest shipping company, has invested $220 million in the new ships, the first of which is about 55 percent complete and expected to be delivered late next year, Matson's C. Bradley Mulholland said at a news conference.

The new ships will be bigger, faster and more efficient to operate, Mulholland said, allowing Matson to manage overhead amid future challenges; including Hawaii's still-sputtering economy since Sept. 11, upcoming contract negotiations and increased maritime security measures.

"Each ship could save $6 million a year" in operating costs, counting lower fuel costs, smaller crews, reduced maintenance needs and other factors, Mulholland said.

Bird of the ocean

The first new vessel is due to be put into service in late 2003, with the second following sometime in 2004. The first ship will be called the Manukai, which various Polynesian languages translate as bird of the ocean. Matson has used the name before, with its Delaware-built Enterprise, launched in 1998, which at the time was the "largest, fastest containership in the world," according to Mulholland.

It was later renamed Manukai, after an older ship of that name was retired. That ship is now itself ready for retirement and it is time to continue the tradition, Mulholland said.

Such a deal

Mulholland said that when the R.J. Pfeiffer was completed, a containership named after the longtime chairman of Matson's parent Alexander & Baldwin Inc., it cost about $150 million. That was in 1992 and a $110 million price for each of the new ships represents a substantial discount.

The builder agreed because the Manukai is the first ship it is building in the United States and the purchase placed Matson and its parent A&B at some risk, he said. Matson's future calls for improvements in both its port facilities and its fleet, Mulholland said.

"We want to have an infrastructure in place that can handle Hawaii's future," Mulholland said. He noted that for Matson, the shipping market in Hawaii has remained stagnant over the past 4-5 years. "If the market's not going to grow, you've got to find a way to get costs out of your business."

A contract for Matson's purchase of two 600-foot plus container ships from Kvaerner Philadelphia Shipyard Inc. was signed May 29.

Matson, headquartered in San Francisco with a major modern container yard at Honolulu's Sand Island, is the shipyard's first paying customer since the former Navy yard was converted to commercial shipbuilding in 1997.

"Matson is a very quality operator," said Ron McAlear, president and chief executive of Kvaerner. "Twelve of these (types of) ships have been built at one of our sister shipyards in Germany. The technology was there, the ships have been proven and the design has been done."

Aside from improving its ships to strengthen its core business, Matson also is working to boost revenue from non-core businesses, Mulholland said.

Those businesses include Matson Intermodal System, which provides and arranges transport services for cargo by truck or train once it reaches the mainland, and an air freight service that operates between a handful of airports in the United States and Canada.

Contract conflict

Of immediate concern to the company is a new three-year contract for about 12,000 employees on the West Coast and another 480 or so workers in Hawaii.

The current contract ends this month, and Mulholland said he is optimistic that common ground can be found, saying a slowdown or work stoppage would have negative impacts on Hawaii similar to the terrorist attacks.

"After 9/11," he said, "we don't need another major reason for people not to come here."

Mulholland said he did not have an estimate on how much Matson has spent to evaluate and implement new security measures since the terrorist attacks, but said the company has been working with the Coast Guard and Honolulu Harbor to enhance shipping security.

Additionally, an independent contractor has been brought in to evaluate security measures and make recommendations.