Full speed ahead for Philly Shipyard and TOTE to enter Hawaii trade

by Michael Hansen, Hawaii Shippers Council, September 27, 2017

The Philadelphia Inquirer published on September 25, 2017, the news article, “Cargo carrier gets the OK to operate with Philly Shipyard vessels to Hawaii,” reporting on Hawaii State Governor David Ige’s press release of September 21st announcing container terminal assignments among three ocean carriers in Honolulu Harbor and the reaction of Philly Shipyard Inc.

The reporter cites statements by Steinar Nerbøvik, president and CEO of Philly Shipyard, which were made after Gov Ige’s press release was issued.

Philly Shipyard signed a letter of intent (LOI) with Saltchuk Resources Inc. / TOTE Inc. (TOTE) to build four (4) gearless and cellular containerships for the domestic Hawaii trade based upon the Aloha Class 3600 TEU containerships it’s currently building for Matson Navigation Company Inc. (Matson).

Nerbøvik contends that they are holding to the original schedule of delivering the first two containerships in 2020 and the second two in 2021 to TOTE for the Hawaii trade.

This, despite, there would be no apparent terminal in Honolulu Harbor where TOTE could transact its cargo. Obviously, Philly Shipyard and TOTE are not planning to follow Gov Ige’s plan.

The reshuffling of the various ocean carriers between the three container terminals in Honolulu Harbor that would make the Diamond Head Terminal at Piers 1 & 2 available to TOTE – as described in Gov Ige’s press release -- can’t begin until Kapalama Container Terminal (KCT) is completed. That is not projected by the Hawaii State Department of Transportation, Harbors Division, until sometime in 2022.

After that, we have estimated there will be another 2 ½ years before Diamond Head Terminals at Piers 1 & 2 would become available to TOTE.

Nerbøvik clearly takes aim at Pasha Hawaii Transport Lines LLC (Pasha Hawaii)’s four old – nearly 40 years old – containerships acquired from the defunct Horizon Lines Inc. in 2015. Those four ships will not meet the International Maritime Organization (IMO) emissions standards that come into effect on January 1, 2020, and cannot be operated after that unless substantially modified.

The reporter states that Philly Shipyard “has spent $75 million on parts to begin construction of the four vessels, which will provide work for 1,200 employees at the South Philadelphia shipyard through 2021.”

This would appear to mean that Philly Shipyard and TOTE have every intent to challenge Pasha Hawaii not only for assignment of KCT, but also Pasha Hawaii’s current operations prior to completion of KCT.

Key excerpts:

Philly Shipyard is building as many as four new container ships to carry goods between the West Coast and Hawaii. That state’s governor last week gave the green light for a third cargo line to use two piers in Honolulu Harbor, paving the way for the Philadelphia-built vessels to deliver food, autos, and other goods to Hawaii.

Philly Shipyard, formerly called Aker Philadelphia Shipyard, has spent $75 million on parts to begin construction of the four vessels, which will provide work for 1,200 employees at the South Philadelphia shipyard through 2021.

“It was an important milestone last week,” said Steinar Nerbovik, president and CEO of Philly Shipyard. “All the competitors were discussing back and forth if there was space for a third carrier. And now, we have secured the harbor access. We’ll be able to build four more container ships for Tote, and that will give 1,200 workers in Philly Shipyard work for another four years. This is fantastic for us.”

Currently, some U.S.-flag container ships transporting a mix of cargoes to Hawaii are old steamships that by 2020 will not meet tighter emissions standards.

The first two ships for Tote will be completed in 2020, and the second two in 2021.

In 2020, when stricter emissions regulations take effect, several older steam-powered vessels serving the Hawaii trade route will not comply. Philly Shipyard has said the circumstances created a “unique opportunity” for a new carrier to enter the Hawaii container market.