Horizon Lines charters five new ships

Horizon Lines charters five new ships    Horizon Lines Inc., a Jones Act container shipping and logistics services company, said it has reached an agreement in principle to charter five new U.S.-flag, foreign-built vessels from Ship Finance International Ltd.
   Each of the vessels, to be chartered for 12 years, will carry 2,800 TEUs and have a service speed of 23 knots. The new ships will be deployed in Horizon Lines' weekly service that links the U.S. West Coast with Guam and Asia, upgrading the carrier's current 'TP-1' service.
   'The vessels we are going to be chartering are now under construction at Hyundai in South Korea,' Charles G. 'Chuck' Raymond, president and chief executive officer of Horizon Lines, told Shipper's News Wire. The first vessel will be delivered in January 2007.
   Ship Finance International is buying the vessels and will bareboat charter them to Horizon Lines, which will provide the crews. All five vessels will sail under the U.S. flag, and their crews will be U.S. citizens.
   While en route from the U.S. West Coast to Guam and Asian ports, 'we will be stopping at Hawaii with those ships,' Raymond said. 'However, since they are foreign bottoms, they can't carry cargo from the continental U.S. to Hawaii. So, what we'll do is to pick up cargo in Hawaii going to Guam, as well as freight already sent to Hawaii from Southern California that is going on to Guam.'
   'Out of Guam, we're moving a large amount of garments coming from the Commonwealth of the Northern Marianas, which are American territories,' he explained.
   As for cargo from Asian ports beyond Guam, Horizon will 'turn over the remaining capacity of the ships to Maersk, which will load the vessels eastbound,' Raymond said.
   'The benefit of working with Maersk allows some very attractive round-trip economics. We've had that agreement in place with Maersk since 1999, and it is continuing,' he explained.
   On the return trip from Asia, the five new vessels can call at any U.S. port.
   'This is a creative way of redeploying our U.S. bottoms in trades that require those ships in such a way that reduces the average age of our ships by 10 years,' Raymond said.
   In a statement to Horizon employees appended to the company's press release, Raymond explained that the new vessels will 'provide the speed and capacity to preserve our valuable relationship with Maersk and our access to Asian markets.'
   As for building abroad, 'we have talked with the major U.S. shipyards about building ships here. While we could probably get financing for this, it is the wrong time to leverage-up our company,' Raymond said.
   'The expense of building in U.S. yards today is between two and three times the foreign costs. We have concluded that the best way to serve our Jones Act trades is to use foreign-built U.S.-flag ships in the trades where they are able to be used, and to concentrate our Jones Act assets in the Jones Act trades,' he explained.
   'Besides increasing our competitiveness with Guam, these new ships will free up the vessels which we are currently using in the TP-1 service, all of which are Jones Act-eligible,' Raymond said.
   By July 2007, Horizon Lines plans to operate 17 active ships and have four vessels in reserve status.
   Raymond declined to give a dollar figure for Horizon's charter agreement with Ship Finance International, a Bermuda-based company that purchased 47 VLCC and Suezmax tankers from Frontline Ltd. in 2004. The company's current fleet of 51 ships includes two 1,700-TEU, Cyprus-flagged containerships built in 2005. That pair of vessels will not come Horizon's way, Raymond said.
   Horizon Lines, based in Charlotte, N.C., operates 16 U.S.-flag vessels on routes linking the continental United States with Alaska, Guam and Puerto Rico.
   Matson Navigation Co., which carries cargo from the U.S. West Coast to Hawaii and Guam on U.S.-flag vessels, considered using foreign-built ships to serve its Guam route.
   Matson eventually decided to use an American shipbuilder. Doing so allowed Matson added flexibility in deploying vessels on whatever service it needed.
   A source at Matson said the company had no comment on Horizon's new ships.