Are the COVID-related ocean shipping capacity shortages impacting Hawaii?

by Michael Hansen, Hawaii Shippers’ Council, October 8, 2021

The Pacific Business News (PBN)’s Brian McInnis contacted the Hawaii Shippers’ Council (HSC) in March 2021 to ask if the COVID-related international ocean shipping shortages are impacting Hawaii and published a special report based on that interview.

PBN published the article, “Special Report: Hawaii Shippers Council on issues facing maritime industry,” on March 19, 2021.

The raison d'ê·tre for the PBN inquiry is the widespread concern in Hawaii that the widely-publicized shipping issues being experienced in international trade might be impacting the domestic Hawaii trade?

Essentially the domestic ocean shipping operating between the U.S. West Coast (USWC) and Hawaii is largely insulated from the affects of the capacity shortages affecting the international container shipping industry worldwide. The adverse effects of the ocean shipping industry on international trade include port congestion, shortages of containerships and shipping containers, sharply rising freight rates and marked delays on the delivery of merchandise.

The reasons the domestic Hawaii trade is insulated from these international trade impacts are the dedicated fleet of containerships and containers, employment of small containerships, dedicated marine container terminals on both ends, and no increase in cargo volume (as compared to the huge increases in international trade).

These factors remain the same today in October 2021.

Key excerpts from the PBN:

Worldwide ocean cargo shipping is playing catch-up from coronavirus-related delays at various ports, especially on the West Coast of the U.S. Mainland, but so far Hawaii has been largely insulated from additional costs.

Hansen identified a three-pronged issue as the main concern in Trans-Pacific shipping in early 2021: port congestion, which means backed-up quantities of ships and containers, due in part to a coronavirus-related workforce shortage, and in part by a surge in consumer spending; a shortage of containers in places like Asia as a consequence of them not being returned; and ship capacity shortcomings as urgency mounts to get cargo moved.

He noted, however, that Hawaii’s two primary carriers, Matson and Pasha Hawaii, employ a fleet of smaller ships with mostly designated docks that allow them to bypass delays felt by other carriers.

As a result, cargo freight rates, Eastbound and Trans-Pacific, have gone from around $2,000-$2,500 up to $4,500 for a 40-foot dry standard box.

From what I can gather, freight rates on the Jones Act [domestic] side haven’t gone up that much, but certainly freight rates on the international side have risen substantially.

The Jones Act freight rates are a whole lot higher than foreign flag freight rates, so we’re starting from a much higher level.

Matson, because of its unique position with dedicated terminals on the Pacific Coast, has been able to avoid these types of disruptions.

Pasha, like Matson, operates relatively small containerships in the Hawaii trade — 2,300 to 2,400 TEU (20-foot equivalent units) capacity.

In 2020, the cargo volumes in Alaska and Hawaii are a bit depressed from 2019 levels. So we don’t have a capacity problem yet.

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PBN: Special Report: Hawaii Shippers Council on issues facing maritime industry