Honolulu Harbor changes make way for third mainland shipper

A company angling to compete in the industry that delivers most things consumed in Hawaii has secured crucial space at Honolulu Harbor and cleared a key hurdle that could have blocked the endeavor.

Gov. David Ige and state Department of Transportation officials on Thursday announced the arrangement that allows TOTE Inc. to launch its planned shipping service from the mainland in 2020.

Ige said TOTE’s move, along with making harbor facilities more efficient, will provide more shipping options for businesses and could lead to more competitive pricing and lower costs for consumers.

“We are modernizing Honolulu Harbor with much needed infrastructure improvements and creating space for a new service to enter the market while expanding (container) terminal capacity for the entire shipping industry,” he said.

Hawaii relies heavily on shipping, which brings in about 80 percent of everything consumed locally.

The harbor deal clears the way for competition between Matson Inc., Pasha Hawaii Transport Lines and TOTE, an established containership operator in Alaska and Puerto Rico that also is a sister company to interisland cargo carrier Young Brothers.

“TOTE is deeply committed to serving the people of Hawaii,” Anthony Chiarello, the firm’s president and CEO, said in a statement.

Under the arrangement, TOTE will use Piers 1 and 2 on the Diamond Head side of the harbor along the edge of Kakaako. Matson, which splits 130 acres of space at Sand Island with Pasha, will take over Pasha’s area. And Pasha, which also uses Piers 1 and 2, will relocate to what is to become a new container terminal long planned by the state at the harbor’s Ewa end, on the former Kapalama Military Reservation site.

Matson called the arrangement fair and equitable. “This allows us to continue preparations for our much needed terminal expansion without interruption,” Vic Angoco, a Matson senior vice president, said in a statement.

George Pasha IV, president and CEO of Pasha Hawaii’s California-based parent The Pasha Group, expressed gratitude for the state following through with its long-envisioned Kapalama container terminal. “We feel very fortunate to have the expertise and longstanding support of (DOT’s) capable staff, and look forward to continuing to team up with them towards the successful completion of the project,” he said in a statement.

Accommodating all three carriers at the harbor will involve big investments by the state and the companies.

Developing the Kapalama terminal is expected to cost the state $448 million. The state also expects to spend an additional sum not yet estimated improving Piers 1 and 2.

These costs are recouped through harbor user fees, which DOT recently increased, because the state’s commercial harbors are operated without general state or federal taxpayer money.

Matson is spending $60 million to upgrade and expand its container terminal at the harbor, including three new cranes. Pasha and TOTE would also install cranes at their terminals.

At Piers 1 and 2, TOTE’s terminal will cover 45 acres. To make room for the operation, foreign cargo carriers APL and NYK will use part of the new Kapalama site. Cruise ships would still be able to use Pier 2. The Foreign Trade Zone in the area will not be affected. Work on Piers 1 and 2 is projected to be done by 2020, when TOTE intends to begin service using two new ships. TOTE plans to add two additional ships in 2021.

At the Kapalama site, DOT has awarded a $163.5 million low-bid contract to Kiewit Infrastructure West Co. for an initial phase slated to begin in December. This work covers an 84-acre container yard, support buildings, security gates, lights, utilities, street paving and a weigh station. Raising the land by 2 feet to accommodate sea level rise also is part of the work.

A second phase expected to go out for bid next year will involve mainly pier improvements and dredging. Completion of both phases would allow Pasha to start operations there in 2022.

Pasha, which operates six ships, has ordered two new ships for delivery in 2020 and will upgrade its four oldest ships so they can remain in service and meet new federal emissions regulations.

Matson operates 11 ships in Hawaii. It is having four bigger new ships built that will replace six older ships without a capacity loss between 2018 and 2020.

Expanding container space at the harbor has been in discussion and planning for more than a decade. The state said shipping operations at the harbor are 75 percent more dense than at Seattle and Oakland ports, and that improvements will reduce severe congestion.