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Matson orders two new conro ships

The Honolulu-based shipping company agreed to pay $511 million for both of the Kanaloa Class vessels from General Dynamics NASSCO.

Artist rendering of the Kanaloa Class vesselSource: Matson, Inc.

   Matson has ordered two combination container and roll-on/roll-off ships from General Dynamics NASSCO for deployment on its services to Hawaii, the Honolulu-based shipping company said Thursday.
   Under the agreement, Matson will pay the San Diego-based shipyard $511 million for both vessels, with deliveries scheduled for the end of 2019 and mid-year 2020.
   Matson said the ships will be built on a 3,500-TEU “vessel platform,” which is 265 meters long, 34.9 meters wide (beam) and a deep draft of 11.5 meters. However, part of the container-carrying capacity will be taken up by an enclosed
garage space that will hold up to 800 vehicles, so the ship will actually carry 2,750 TEU.
   Matson is calling these vessels the “Kanaloa Class” in honor of the ocean deity revered in the native Hawaiian culture and will name each of the new vessels after predecessor ships from its 134-year history. The first vessel will be named Lurline, the sixth Matson vessel to carry that name, while the second vessel will be its fifth one named the Matsonia.
   The new vessels will have a fuel efficient hull design, double hull fuel tanks to help protect the environment, fresh water ballast systems and dual-fuel engines, meaning they will be able to operate at speeds up to 23 knots on either conventional fuel oils or liquefied natural gas (LNG). However, the ships would require some modification for LNG, including setting aside space for LNG tanks.
   Matson said the two Kanaloa Class ships will replace three diesel powered vessels in active service, which will be moved to reserve status. With delivery of the Kanaloa Class ships, along with its two new 3,600-TEU Aloha Class ships currently being built at the Philadelphia Shipyard, Matson said it will have completed the renewal of its Hawaii fleet, allowing it to retire its seven older steamship vessels that would not be able to comply with environmental regulations in 2020 without substantial modification.
   In addition, Matson said the larger capacity of the Aloha Class and Kanaloa Class vessels will allow it to return to an optimal nine-ship fleet deployment in Hawaii, increasing efficiency and lowering operating costs.
   Today Matson has 11 ships deployed in four strings of ships that call Hawaii: two ships operate between Long Beach and Hawaii, two between between Oakland and Hawaii, two between Seattle, Oakland and Hawaii, five that are in a rotation between Long Beach, Hawaii, Guam, and the Chinese ports of Xiamen, Ningbo and Shanghai.
   The Kanaloa Class vessels are expected to be more fuel efficient than the ships they will replace and will add rolling stock carrying capacity while lowering operating, repair and maintenance, and dry-docking costs.
   The company said “Upon delivery of the Aloha Class and the Kanaloa Class, the renewal of Matson’s Hawaii fleet will be complete and the Company expects to benefit from improved vessel reliability as the average age of the Hawaii fleet will have declined from 27 years old today to only 13 years old in 2020.”
   Matson expects to finance the new vessels primarily through cash flows from operations, borrowing under the company’s unsecured revolving credit facility and additional debt financings, which could include U.S. government guaranteed Title XI vessel finance bonds.
   “The two Kanaloa Class Con-Ro vessels have an average contract price of $255.5 million per vessel compared to the two Aloha Class containerships ordered in November 2013 which had an average contact price of $209.0 million per vessel,” said Matson, noting “The higher contract price for the Kanaloa Class vessels is primarily driven by the inclusion of a 9,650 sq. meter roll-on/roll-off garage structure and self-contained stern ramp with capacity to load up to 800 automobiles and other wheeled cargo. In addition, since November 2013 there are more stringent and costly environmental regulations that impact hull form and engine specification requirements, and lastly, there has been modest inflation in U.S. shipyard construction costs.”
   Ships trading between the U.S. mainland and Hawaii, Alaska and Puerto Rico are subject to the requirements of the Jones Act must be built in the U.S. and therefore are much more expensive to build than ships that trade internationally. They are also required to be registered in the U.S., be owned by U.S. companies, and have U.S. citizen crews, which increases operating costs.
   H.J. Tan, an executive consultant with Alphaliner said  “The closest comparable ships are the ACL G4 conro ships, ordered in 2012 in China for about $90 million. The G4 ships are larger than the Matson ships, with a length of 296m and beam of 37.6m, with a capacity for 3800 teu and 1300 vehicles.”

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.