By Gerardo R. Partido
Variety News Staff

THE competition between the two shipping lines serving the region appears to be heating up as Horizon Lines scaled back its fuel surcharge hike for its Hawaii, Guam, and CNMI trades.
Horizon’s fuel surcharge will now increase by just 1.75 percent, from 20.75 percent to 22.5 percent.
Earlier, Horizon announced that its fuel surcharge would increase by 2.25 percent, from 20.75 percent to 23 percent.
When Matson Navigation made its own fuel surcharge hike announcement, the company said it would increase its fuel surcharge only by 1.75 percent, from 20.75 percent to 22.5 percent.
With Horizon’s latest announcement, the two shipping companies have now matched each other’s proposed fuel surcharge increase.
The initial disparity between the fuel surcharge hike proposals of Matson and Horizon is the result of a difference between the two companies’ fuel cost projections.
Both have filed their respective fuel surcharge rate hikes with the U.S. Surface Transportation Board and both plan to implement the increase by May 27, 2007.
While this development is good news for the region’s consumers, the proposed fuel surcharge hikes will elevate the fuel surcharge cost to one of the highest levels historically reached by both shipping companies.
If Horizon’s earlier 23 percent fuel surcharge hike petition had pushed through, that would have been a record for the company.
As it stands, the 22.5 percent Matson fuel surcharge hike proposal would be the highest surcharge Matson has applied since the company first implemented its fuel surcharge back in 1999.
The latest round of fuel surcharge hike proposals for Horizon and Matson come as both shipping companies raised their fuel surcharges only last May 6.
Dave Hoppes, Matson senior vice president for ocean services, said Matson has been forced to continue raising its fuel surcharge due to rising fuel prices which he described as “near record” levels.
He said fuel consumption is an unavoidable and significant component of Matson’s operating costs, with every dollar increase per barrel adding over $2 million in annual costs.
Horizon Lines also attributes its latest fuel surcharge adjustment to “yet another significant trend” in the carrier’s fuel costs.
“This latest trend has been felt in all areas of our business, to include fuel surcharges on trucking and rail, fuel costs to operate terminal machinery and equipment, and bunker cost to operate our ships,” a statement from Horizon’s marketing department said.
Both companies are not optimistic that fuel prices will come down soon.
Horizon Lines forecasts that its fuel costs will remain at the current level or even escalate further during the summer months when motorists’ demand for fuel picks up.
And the fact that Horizon initially wanted a 23 percent fuel surcharge hike was reflective of the company’s gloomy fuel cost forecast.
Matson also said that it would continue to monitor fuel costs and adjust its fuel surcharge accordingly.
The new fuel surcharges by Horizon and Matson represent the third straight increases for both companies.
But they also follow three consecutive cuts implemented by both shipping lines.
Hoppes pointed out that when there were steady declines in fuel prices in late 2006 and early 2007, Matson responded by making three consecutive fuel surcharge cuts.
But when the new fuel surcharges take effect on May 27, both Horizon and Matson would have raised their respective fuel surcharges by 5 percentage points since Jan. 28.