Horizon ends service to Guam

Matson Navigation Co. anticipates becoming the sole container cargo carrier to Guam after a planned exit next month by rival Horizon Lines Inc.

Horizon said it will quit serving Guam, Micronesia and the Northern Mariana Islands as part of a decision to end service between California and China.

The move by Charlotte, N.C.-based Horizon won’t affect Hawaii cargo service, but provides Matson, the ocean transportation subsidiary of Honolulu-based Alexander & Baldwin Inc., an opportunity to capture additional business.

Horizon began its China service less than a year ago, in December, using five ships. A weekly stop served Guam.

A decline in freight rates has hurt Horizon’s earnings with no prospect for a near-term turnaround, the company said.

"Given current market conditions and foreseeable future expectations, discontinuing the service is the appropriate decision for the company," Brian Taylor, Horizon chief operating officer, said in a statement. "It will allow us to focus all of our resources on serving customers in the very solid domestic ocean markets in Alaska, Hawaii and Puerto Rico."

The company said ending its China and Guam service was a difficult decision, but said shipping capacity is projected to continue to outpace demand next year.

Horizon’s last sailing from China is scheduled to depart Nov. 2. The last departure from California to Guam is scheduled for Nov. 10.

Horizon and Matson are the only two container carriers serving Guam and adjacent islands. Another carrier, Waterman Steamship Corp., serves Guam with a ship designed to carry vehicles that can be driven on board.

Matson announced Tuesday that it would fill the void created by Horizon without compromising service standards or increasing the frequency of its weekly service. "We will do what is necessary to ensure that all Guam cargo currently moved from the U.S. will be efficiently accommodated," Dave Hoppes, senior vice president of ocean services for Matson, said in a statement.

Matson anticipates a rival company will eventually enter the Guam market to restore container cargo competition.

During the first half of this year, Matson delivered 6,700 containers to Guam. Horizon does not disclose its Guam volume.

Horizon said part of its decision to cease Guam service was due to deferred construction work associated with delayed plans to redeploy U.S. military forces from Okinawa, Japan. Without a military buildup creating more shipping demand, serving Guam was no longer financially viable without an eastbound return voyage from China, the company said.

Matson has scaled back, but not terminated, its own service from China.

Matson began serving China in 2006, and doubled the service in September 2010 just before Horizon’s entry. In August, Matson cut its China service in half after it racked up an $11 million after-tax loss in the second quarter. Matson’s cutback was forecast to cost another $20 million to $25 million.

Horizon said it expects to take a $105 million-to-$110 million pretax restructuring charge in its fiscal fourth quarter 2011 connected with its service termination.

Shares of Horizon stock closed Tuesday at a 52-week low of 24 cents. Matson shares closed at $40.48, down from $41.35 on Monday.