The shipping news: Matson raises rates

Matson Navigation Co. is raising its rates for shipping containers to Hawaii an average 3.8%, and Horizon Lines is expected to do the same. The two bring us 80% of what we consume.

Matson decided not to be The Grinch That Raised the Price of Christmas - the new rates don't take effect until Jan. 2. And when the rates do rise, you won't notice much.

Wholesalers and retailers love to complain about shipping costs, but those costs make up a surprisingly small percentage of the cost of goods that have to travel thousands of miles to get here.

Shipping a container from the West Coast to Hawaii can cost anywhere from $2,000 to $7,000 depending on what's in it and whether it has to be refrigerated.

Christmas trees and milk are high-end, therefore, but toilet paper comes cheap.

The rate hikes - $180 westbound, $145 eastbound - that's the basic rate hike plus a simultaneous increase in "terminal handling fees" - work out to half a cent on a can of soda, 1.2 cents on a head of lettuce, and 13 cents on a 20 lb. bag of rice, assuming the entire added cost were passed on to you.

Here's a good basic rule of thumb on shipping rates. Shipping costs cannot possibly be exorbitant so long as it is cheaper to ship milk from California than to produce it in Hawaii.

 

Comments

[Colin]

Press report also said, in addition to the RATE increase was a FEE increase "per container." Together, the two increase seems to amount to closer to 10%!

Doubling your exampled cost increases to cover the actual increase, we all need to recognize that no business is going to pay more fees, rent or anything else (in the long term, at least) without getting back MORE than the increase in what's paid out. Why spend $1,000 more to only get $1,000 back? Of course not! A typical business not operating at big-box scale which has to spend $1,000 (more) is going to want $1,100 or more back in return of its cost of capital. The point is the effect of the Matson cost increases on the ultimate consumer - even after acknowledging that this go-round is more like 8-10% - is higher than the retailer's cost increase.....................................................................................................................................................................[Because a container may cost anywhere from $2,000 to $7,000 depending on what's in it, the percentage increase differs according to "percentage of what" - 10% of $2,000 is $200 while 10% of $7,000 is $700. As for the issue of whether the increased cost is passed through, it depends, as it always does, on (1) what the market will bear, and (2) what the wholesaler/retailer can afford. HMD]