A major ocean cargo carrier has announced plans to expand operations to Hawaii, in a move that could significantly increase the state’s fleet of container ships.

But whether new competition will reduce shipping costs – and ultimately the cost of goods for consumers – isn’t clear.

Tote Inc., a unit of Seattle-based Saltchuk, last week announced plans to establish a new shipping service to Hawaii that would compete with Matson and Pasha Hawaii to provide shipping services to the islands. Saltchuk also owns Young Brothers Ltd., the Hawaii interisland cargo transportation company.

Pasha Hawaii and Matson could face new competition from a third container carrier by 2020. Cory Lum/Civil Beat

But the reaction from analysts belies the axiom that competition is good for consumers.

“Our initial reaction regarding Tote is this is not good as the Hawaii trade lane cannot support a third competitor,” wrote Kevin Sterling and Willard Milby, analysts with the Richmond, Va., office of Seaport Global, an investment bank and research firm based in New York and New Orleans.

“A third competitor will severely disrupt the market, in our view,” they said, “reminiscent of the damage we saw in Puerto Rico, where four competitors were extremely cutthroat (we remember vividly as we used to follow Horizon Lines when it was a publicly traded company serving Puerto Rico, Hawaii and Alaska).”

Mike Hansen, president of the Hawaii Shippers’ Council, said there may be a period of intense competition, which could reduce costs for people shipping cargo.

“But I can’t believe it will last very long,” he said.

The announcement sent Matson shares tumbling, as Wall Street viewed the potential new competition as a bad harbinger for Hawaii’s major incumbent carrier. After trading around $30 earlier this week, Matson stock closed Friday at $22.79, down 22.35 percent for the day. It was the company’s biggest decline since it started trading in 1972, Dow Jones Inc.’s MarketWatch reported.

Hansen said there was the potential for a replay of a transportation debacle that took place a decade ago, when three major interisland airlines ended up cannibalizing each other in a fierce fare war that, when the dust settled, left only one of them still operating.

Matson shares suffered their biggest single-day drop ever  after news that a new cargo carrier would come to Hawaii Yahoo! Finance

“With the carriers, you could end up in a situation like you had in Hawaii with Hawaiian, Aloha, and Go!,” he said.

Still, Tote has far to go before it can actually begin the service.

The company said it is working with shipbuilder Philly Shipyard Inc. to construct four new containerships, custom built for the trade.

Tote said it began conversations with Hawaii officials to secure new deep-water berths at Kapalama Container Terminal in Honolulu.

“Tote is excited to bring our best-in-class service to the people of Hawai’i,” Tote’s president and chief executive, Anthony Chiarello, said in a statement. “Tote’s presence on the islands will provide market stability and introduce new environmentally advanced vessels that will greatly benefit the islands.”

Tote’s announcement followed a news release issued by Philly Shipyard in June, when the company announced it was working on the Hawaii ships but did not disclose the carrier for which it was building the ships.

“We are excited to get started on building a new fleet of containerships for a new carrier in the Hawaii trade and are pleased to have received such positive feedback from well-known U.S. marine players and financing sources,” Steinar Nerbovik, Philly Shipyard’s president and chief executive, said in a statement. “Philly Shipyard has a strong track-record of building quality vessels for this trade, and we believe local communities can benefit greatly from the safe and reliable service provided by our modern, efficient and ‘green’ ships.”

Philly Shipyard’s team includes former senior shipping executives with experience in the Hawaii containership business, including John Keenan, who previously served as Horizon Lines’ president and chief operating officer from 2007 to 2011.

Tote brings significant transportation and shipping experience. It has worked as a carrier in Alaska for decades, and its parent Saltchuck has a variety of air cargo, shipping and logistics services.

Still, analysts were skeptical about the venture.

Hansen said Tote will have to invest at least $1 billion for ships, containers and other equipment for the service, which would come online starting around 2020.

“On the surface, this makes no sense to us as the Hawaii trade lane cannot support a third competitor,” Seaport Global reported.

So is Tote looking to drive out a competitor the way Go! sought to drive out Aloha?

“Possibly,” Seaport Global wrote, “but it will take time as (Matson) and Pasha will not want to easily give up ground and a price war could break out.”

The result: “It could be tough sledding in Hawaii for a few years beginning in 2020,” Seaport’s analysts wrote.

For its part, Matson doesn’t seem too worried about the competition.

Matson has been the market leader in Hawaii for 135 years and we expect to lead for many years to come,” the company said in a statement to Civil Beat. “We continue actively investing in our service, including nearly $1 billion in new ships and terminal improvements coming online over the next three years, and remain committed to our mission – to move freight better than anyone.”

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