Fuel costs prompt
Matson to raise rates

Consumers could see effects
on prices early next month

Consumers of goods shipped to Hawaii could see slightly higher price tags beginning Oct. 2, when a fuel surcharge increase announced yesterday by Matson Navigation Co. is scheduled to take effect.

Matson said higher fuel prices are forcing the company to raise its surcharge 13 percent, to 13 percent from 11.5 percent, for goods shipped to the state. Matson's announcement followed news earlier this week that Horizon Lines would impose a 2.5 percent emergency fuel surcharge in addition to its 11.5 percent fuel surcharge.

The increase is the latest in a series of boosts that began in October 1999, when Matson established a 1.8 percent fuel surcharge. Although Matson has reduced the surcharge a couple of times since then, customers have seen a nearly continuous increase. The surcharge has nearly doubled since May 2003, when it was 6.5 percent.

Dave Hoppes, Matson's vice president for ocean services, said the company has faced fuel price increases of more than 10 percent in the past three months, "necessitating this new adjustment."

Jeff Hull, a Matson spokesman, said Matson will re-evaluate the surcharge later.

"This is a quarterly review, so we'll revisit this in three months and hopefully see some relief," he said.

By some measures the increase announced yesterday is insignificant. For example, Hull said the increased shipping cost for a 40-foot container of 8-foot-long two-by-fours amounts to slightly less than a penny per two-by-four. Likewise, a 20-pound bag of rice will cost about a penny more to ship.

While this might seem like small change for consumers, it is a different story for retailers, who must decide whether to pass the costs on to customers or try to absorb them.

Larry Lanning, marketing director for Hardware Hawaii, said many retailers are operating with profit margins "in the single digits." So even a penny increase on a piece of lumber can take a significant bite out of that margin, Lanning said.

Lanning said that like Matson, retailers can only absorb so much in increased energy costs before passing them on to customers. However, Lanning said it was hardly a certainty that Hardware Hawaii will pass on the costs.

"It is a significant factor, and if we see it as a continuing factor, then we'll increase prices," he said.

Carol Ai May, vice president of marketing for City Mill Co., echoed Lanning.

"Our profit margins are going down," she said. "We don't automatically pass everything on. We're just going to have to wait and see what happens."

Although Lanning said he did not blame Matson, he also said, "That doesn't mean that any of us like it."

"We have to look at the oil situation, and that's not easy," he said.