Matson, Horizon Shippers in Financial Flux; Sea Star Admits to Price Fixing, Bid Rigging

Photo: Emily Metcalf
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Photo: Emily Metcalf

BY MALIA ZIMMERMAN – Hawaii relies on two primary cargo container shipping companies to bring goods from the mainland, and both those shipping companies – Matson and Horizon Lines – are in financial flux.

Matson, which is owned by Alexander & Baldwin, saw its third quarter profit fall by one third over this same time last year to $28.6 million.


The Journal of Commerce Online said the ocean carrier, which brings two thirds of the goods coming to Hawaii in cargo container ships to the islands, was hurt by the costs of shutting down its second China-Long Beach service.

The Journal reports that the loss that Matson incurred was minimized in part by increases in Hawaii container volumes and lowering its operating expenses.

Horizon Lines also is facing financial challenges. While the company avoided bankruptcy this fall, it was delisted from the New York Stock Exchange in mid October because its average capitalization over 30 trading days fell below $15 million.

The company recently completed a refinancing of $652 million, and issued 25 million new shares as a part of its restructuring.

Adding to Horizon’s troubles, the U.S. Department of Justice fined the company $45 million last February for a felony antitrust violation related to price-fixing in the Puerto Rico trade. The Justice Department agreed to reduce the fine to $15 million because of Horizon’s inability to pay.

This week, Horizon also reshuffled and expanded its board of directors.

As a consequence of shutting down its own China service, Horizon Lines also has left the Guam market.

Matson’s original China-Long Beach service remains very profitable because it includes Hawaii and Guam on the westbound portion of its voyage.

However, due to Jones Act restrictions, Horizon’s China Service, despite using American flag vessels with American crews, could include Guam but not include the much larger Hawaii market on its westbound voyage (the Jones Act additionally requires that the ships used have been built in U.S. shipyards).

Apparently Horizon Line’s revenues from Guam alone were not enough to offset the losses on its China service and the U.S. flag ships that they were using are now in lay-up.

This leaves Matson as the only container carrier to Guam from the U.S. Mainland.

Horizon has emphasized that it remains very profitable in it Jones Act markets, particularly in Hawaii and Alaska.

It has been reported that Maersk, the Danish shipping giant that is not only the largest in the world but also the largest operator of U.S. flag vessels, has sent representatives to Guam to look at entering the U.S. mainland to Guam market.

However, Maersk is barred from entering the Mainland to Hawaii market due to Jones Act restrictions on foreign ownership.

Meanwhile the federal price fixing investigation into ocean carriers tied to Hawaii that are operating in the U.S. mainland-Puerto Rico trade is heating up again.

Sea Star Line has agreed to plead guilty and pay a $14.2 million criminal fine after admitting to conspiring to set prices and rig bids, according to the Journal of Commerce Online.

The carrier’s former president, Frank Peake, also was indicted on a charge of conspiring to fix prices in the U.S. mainland-Puerto Rico trade, the Journal reports, but Peake will fight the charges.

Sea Star was started as a joint venture between Matson and Saltchuk.

Matson no longer has any ownership.

In Hawaii, Saltchuk owns both Young Brothers and Aloha Air Cargo.

The anti trust investigation by the Department of Justice has been ongoing for several years. Three Horizon executives and two Sea Star executives have pled guilty to antitrust violations.

Matson also turned over documents to federal officials in 2008 as a part of this investigation but no charges have been brought against the company.