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Thin profits, high fuel costs winnow Pacific trade players

November 8, 2011 |  9:54 am

Most of the cargo lumbering along on the gigantic ships of the transpacific trade are traveling between Asia and the United States. But only two U.S.-flagged and -headquartered companies have a piece of the action, and it's a very small piece indeed.

As of Thursday, there will be only one.

On Nov. 10, a cargo ship operated by Charlotte, N.C.-based Horizon Lines will depart the U.S. West Coast with supplies for Guam for the last time. That voyage will end the company's Five Star Express service between China, Guam and the U.S., which had been in operation for less than a year.

Horizon Lines had begun the service in December, when the recovery from the deep global recession still seemed strong, and had hoped to grab a share of what was then a lucrative route in international trade. But trade levels failed to meet expectations, competition drove down freight rates, and high oil prices drove up the cost of the bunker fuel that the ships use.

"This has been a very difficult decision," said Stephen H. Fraser, president and chief executive of Horizon Lines. "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."

The transpacific trade, like most of the world's major ocean shipping routes, is dominated by huge foreign carriers that are large enough to roll with tough times. The three biggest -- APM Maersk of Copenhagen, Geneva-based Mediterranean Shipping Co. and Marseille-based CMA-CGM -- each has a fleet larger than that of the U.S. Navy.

Horizon is small by comparison, ranked 33rd in the world by the French maritime industry consulting firm AXS Alphaliner in terms of the amount of cargo it can haul and the number of ships it has in operation.

Alphaliner said that Horizon is one of six companies that entered the transpacific trade in the last two years. All but two have since dropped out.

Horizon said the amount that it could charge customers to transport a 40-foot cargo container has fallen 37% in the last 12 months, down to $1,500. During the same period, Horizon's fuel costs rose by 40%.

Oakland-based Matson Navigation Co., a subsidiary of Honolulu-based Alexander & Baldwin Inc. and the last U.S. carrier on the transpacific trade route, has said it will offer service to Horizon's customers.


Cargo surge takes a holiday

Manufacturing growth slowed in October

Chinese economy grows at slowest pace in two years

-- Ronald D. White

Photo: A forklift arranges cargo containers near a port in Shanghai. Declining freight rates and high fuel costs along the ocean route between Asia and the U.S. have resulted in a rising number of companies abandoning the trade. Credit: Eugene Hoshiko / Associated Press