American Shipper

Matson, APL may not renew transpacific/Guam alliance

Matson, APL may not renew transpacific/Guam alliance

   Matson and APL may not renew their 10-year-long vessel operating alliance in the transpacific and U.S. mainland/Guam trade when it expires in February 2006.

   Under the alliance commenced in 1996, Matson provides a weekly service to Guam and charters three vessels to APL. In return, APL gives Matson slots on the chartered vessels and on two additional APL vessels. The service employs five U.S.-flag containerships of about 3,300-TEU capacities, of which three are owned by Matson and two by Neptune Orient Lines, the Singapore-based parent company of APL.

   “Since it appears at this time that the agreement will not be renewed, the company is exploring several options related to operating an alternative service,” said Jeff Hull, spokesman for Matson. “Matson is committed to serving Guam and fully intends to continue to serve the region beyond 2006.”

   Hull did not say whether Matson would run a Guam/U.S. mainland service on its own.

   One question raised by Matson’s potential move away from APL is whether it will re-enter the profitable eastbound Asia-to-U.S. trade to maximize the eastbound utilization of the U.S. mainland/Guam ships.

   Alexander & Baldwin Inc., parent company of Matson, said discussions with APL in late June led it to believe that their alliance agreement “will not be renewed in its present form after February 2006, and any new or revised agreement with APL, if a new or revised agreement is entered into with APL, would be on terms substantially less favorable to Matson.”

   The ending of the alliance with APL would hurt Matson’ profits. “Due substantially to the termination of the charter arrangement with APL described above, Matson currently estimates that an annual operating profit reduction of $10 to $20 million, and possibly higher during the transition period following the agreement’s expiration, can be expected,” A&B said in a statement.

   Matson’s annual time charter revenues arising from the APL agreement are about $35 million, and Matson generates substantial additional revenues from its Guam trade. “Taken together, such revenues contribute a significant portion of the ocean transportation segment’s total operating profit,” A&B said. But the Honolulu-based parent company said it is too early to estimate the financial implications of alternative service arrangements being explored by Matson.