Horizon Lines to stop Guam services

Horizon Lines Inc., a leading domestic ocean shipping and integrated logistics company in the U.S., announced Monday that it will discontinue its Five Star Express container shipping services between the U.S. West Coast, Guam, and China.

The Five Star Express or FSX service, which offers rapid eastbound transit between Ningbo and Shanghai in China and Los Angeles and Oakland in the U.S. West Coast, was launched in December 2010 after the long-term space charter agreement between Horizon Lines and Maersk Line expired.

The westbound leg of the FSX service provides transit between the U.S. West Coast, Guam, Micronesia, and the Northern Mariana Islands.

Horizon Lines pointed out, though, that the discontinuation of the FSX Guam and China services will not impact its domestic ocean services in Alaska, Hawaii, or Puerto Rico.

Calls made to the Horizon Lines office on Saipan were referred to the Guam office but calls were not immediately returned.

Stephen H. Fraser, Horizon Lines president and chief executive officer, said in a statement that the decision was “a very difficult” one to make in view of the contributions that have been made by their associates, workers, and vendor partners “who have worked so hard to make the FSX service a success.”

“Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time,” said Fraser.

While the FSX service met volume and vessel use projections, eastbound freight rates from China to the U.S. have fallen more than 37 percent in the last 12 months, posting a record low since the worldwide recession of 2008-2009. Additionally, average price of bunker fuel has climbed more than 40 percent since the FSX service was launched.

With the further delay in the expected infrastructure-driven cargo growth in Guam caused by U.S. and Japan budget crises and revised Japanese priorities after the earthquake and tsunami devastation in March, Guam trade is “no longer financially viable for Horizon Lines.”

Brian Taylor, Horizon Lines executive vice president and chief operating officer, said they do not expect any measurable improvements in fuel prices or the freight-rate environment for the foreseeable future, making the discontinuation of the FSX service “the appropriate decision for the company.”

“It will allow us to focus all of our resources on serving customers in the very solid domestic ocean markets in Alaska, Hawaii, and Puerto Rico,” added Taylor.

Horizon Lines said it will work aggressively to mitigate any supply chain disruptions for its customers and implement an orderly transition plan starting Oct. 31.

The FSX service from China is scheduled to have its last voyage depart Shanghai on Nov. 2. Suspension of ocean services to Guam and surrounding islands will be effective on Nov. 10, the schedule of last sailing from the U.S. West Coast.

In a statement yesterday, Guam Delegate Madeleine Z. Bordallo expressed disappointment with the decision of Horizon Lines to discontinue its Guam services.

“At a time when our economy can least afford it, this announcement by Horizon is an unintended consequence of delaying the military buildup on Guam,” said Bordallo. “Uncertainty created by the Senate provisions and cuts to military construction do not give businesses and investors confidence to incur further risks. So many jobs depend on a known schedule and pace for the military buildup.”

Matson Navigation Co., another leading ocean transportation services company that services Guam and the CNMI, assured the island communities that it has the available capacity to absorb increased demand for cargo in the wake of the announcement of Horizon Lines to discontinue its FSX service.

David Hoppes, senior vice president for ocean services, said in a statement that Matson has been serving Guam since 1996 and remains firmly committed to delivering reliable vessel schedules for the region’s business community.

“Our service encompasses all major ports on the West Coast, with Honolulu serving as a transshipment hub for Guam-destined cargo,” said Hoppes. “We will do what is necessary to ensure that all Guam cargo currently moved from the U.S. will be efficiently accommodated, without [compromising] the service standards that Guam’s business community knows today.”

Hoppes said their commitment extends to the rest of Micronesia, including the CNMI, Palau, Federated States of Micronesia, and the Marshall Islands.

“While we fully expect a new entrant to succeed Horizon Lines in the future, we are confident we can provide the needed stability in the trade during this transition period as well as over the long haul,” added Hoppes.