Matson mulls $365M investment for new Guam-China route

Ocean freight services giant Matson Navigation Company, Inc. disclosed Friday that it is investing some $365 million in vessel, container and terminal assets to launch a new Guam and China service beginning February 2006, as China maintains its domination in the manufacturing sector such as that of apparel.

Matson’s disclosure of the investment plan came following the lifting of quota restrictions on apparel pursuant to the World Trade Organization agreement. The WTO agreement boosts China’s competitiveness to further expand its market share in the United States, the world’s largest apparel market.

It also came at a time when the planned port expansion on Saipan has been lagging on for several years amid a land dispute between the Marianas Public Lands Authority and the Commonwealth Ports Authority, derailing efforts to make the island as a transshipment hub in Micronesia.

In a media statement Friday, Matson said it would acquire two new vessels for an estimated combined cost of $315 million in addition to its current fleet.

“Matson’s highest priority for the past two years has been the development of a viable replacement service for Guam,” said James Andrasick, Matson’s president and CEO. “We also have a continuing interest in expanding our reach into new markets, and at the same time strengthening our service reliability to our home state of Hawaii.”

Matson disclosed having entered into cash-on-delivery purchase contracts for two new U.S.-built containerships from Kvaerner Philadelphia Shipyard, Inc. the same company that built its MV Manukai and MV Maunawili about one to two years ago.

Matson said the two new ships are expected to be delivered and placed in service by July 2005 and June 2006.

“By mid-2006, both new ships will be deployed in an integrated weekly West Coast-Hawaii-Guam-China service together with three of Matson’s most efficient diesel-powered containerships. The planned routing will include port calls at Long Beach, Honolulu, Guam and two ports in China,” Matson said.

The company said it has been modernizing its fleet in recent years, retiring older steam-powered ships to improve fuel and operating efficiencies. The new ships are equipped with more fuel-efficient diesel engines and environmentally friendly design elements, Matson said.

Saipan garment manufacturers are downsizing their operations after the elimination of quota restrictions on apparel. To enhance their competitiveness, they are lobbying for a congressional amendment to the U.S. Tariff Code for the reduction of value-added requirement on garment being shipped to the United States from 50- to 30-percent.

The U.S. Tariff Code currently requires that 50 percent of the value of the garment has to be added locally by transformation, in terms of additional labor, packaging or other overhead costs, so that garment products coming from U.S. exporters like the Commonwealth could enter the United States duty-free.