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Friday, August 25, 2017
Pasha signs contract to build two containerships; what now?
By Michael Hansen @ 1:50 AM :: 5470 Views :: Jones Act

Pasha signs contract to build two containerships; what now?

by Michael Hansen, Hawaii Shippers Council, August 24, 2017

The Pasha Group / Pasha Hawaii Transport Lines LLC (Pasha Hawaii) issued on Wednesday, August 23, 2017, a press release “Pasha Hawaii Announces Construction of Two New Containerships at Keppel AmFELS” announcing they signed contracts that day with Keppel AmFELS, LLC for the construction of two 2,525 TEU Jones Act containerships at their Brownville, Texas, shipbuilding yard.

Keppel AmFELS is a U.S. subsidiary of the privately-held Singapore company, Keppel Marine & Offshore Ltd., which specializes in the design, construction and repair of offshore rigs. Neither Pasha Hawaii or Keppel AmFELS has disclosed from which foreign shipyard the design for the two containerships will be obtained.

This firm order is a necessary first step for Pasha Hawaii to remain a player in the domestic U.S. West Coast (USWC) / Hawaii liner trade.

It’s patently obvious that Pasha Hawaii’s announcement is in direct response to Saltchuk Resources Inc.’s press release issued last Thursday (August 17, 2017) stating their operating subsidiary TOTE, Inc. d.b.a. TOTE Maritime would inaugurate a new entrant service in the domestic Hawaii trade with four containerships to be constructed by Aker’s Philly Shipyards Inc. and utilizing the Kapalama Container Terminal (KCT) in Honolulu Harbor.

The site for that terminal facility is currently being cleared and construction is scheduled to begin later this year by the Hawaii State Department of Transportation (HIDOT), Harbors Division, for completion in the 2020/2021 time frame.

Port planning for the past 20 years or more has assumed that Pasha Hawaii and its predecessor second-tier carriers in the domestic Hawaii trade (SeaTrain, U.S. Lines, SeaLand Service, CSX Lines, Horizon Lines) would relocate from their current Pier 51A Sand Island terminal to KCT. The Harbors plan further provides for Matson Navigation Company Inc. (Matson) to expand their existing Honolulu Terminal at the adjacent Piers 51B, 52 and 53, on Sand Island, and occupy the Pier 51A area vacated by the second-tier carrier.

Saltchuk in their press release last Thursday stated that they began earlier in the week discussions with HIDOT Harbors to obtain the exclusive lease to KCT, which they noted is critical to their launching a new U.S. West coast (USWC) / Hawaii domestic container service. If Saltchuk / TOTE were to be successful they would essentially leapfrog Pasha in to the terminal.

Presumably, the only reason Saltchuk would be able to secure an exclusive lease for KCT is that Pasha had not made the necessary contractual commitments with HIDOT Harbors despite the long term planning, and therefore assignment of the terminal was still an open question.

A parallel issue has been Pasha Hawaii’s apparent reluctance to conclude a firm ship build contract for the replacement containerships they need to meet emissions regulations coming into effect on January 1, 2020. This inaction was seen as prima facie evidence that Pasha may have been unable to make the necessary arrangements.

However, that has now changed with Pasha placing a firm order for two critically needed newbuild containerships. Nonetheless, Pasha still needs to resolve the assignment of the new container terminal in Honolulu Harbor.

Presumably, Pasha and Saltchuk will now have to battle out the assignment of KCT with HIDOT and the State Administration, placing the outcome of this contest in the political realm.

It would appear that Pasha may now be in a stronger position to compete for KCT as they have placed a firm order for two containerships, while Saltchuk / TOTE only has a letter of intent (LOI) with Aker’s Philly shipyard Inc. for two plus two option containerships.

Although, ideally Pasha would need four newbuild containerships to maintain their current schedule, it appears they have an alternative for the third and fourth vessels. Pasha has taken measures to refit two of their existing steam-powered C8 class 2,300 TEU containerships – the HORIZON PACIFIC (built 1979) and HORIZON ENTERPRISE (built 1980) -- in China.

Pasha received a foreign rebuild determination letter from the U.S. Coast Guard (USCG) dated May 25, 2017, stating the proposed hull and superstructure work would be within allowed parameters. In addition, it’s expected that Pasha would re-engine those ships with diesels, as Horizon Lines Inc. once proposed, allowing the ships to meet the requirements of the MARPOL emissions regulations coming into effect on January 1, 2020.

The plot has certainly thickened with Pasha’s announcement, and we will now have to see how Saltchuk / TOTE respond.

Key excerpts:

Pasha Hawaii has announced that two more ships will be joining its fleet which provides service to the Hawaii/Mainland trade lane. The two new Liquefied Natural Gas (“LNG”) fueled containerships will be built at Brownsville, TX-based Keppel AmFELS, a subsidiary of Keppel Offshore & Marine (“Keppel O&M”). The contracts were inked today.

Construction for the two vessels will begin immediately, with delivery of the first vessel expected in 1Q 2020, and the second vessel in 3Q 2020.

The new, 774-foot U.S. Jones Act vessels will carry 2,525 TEUs, including a fully laden capacity of 500 45-foot containers, 400 refrigerated containers, and 300 40-foot dry containers, with a sailing speed of 23.0 knots. The ship’s hull has been fully optimized using computational fluid dynamics (CFD) and will be one of the most hydrodynamically efficient hulls in the world.

The new vessels will operate fully on LNG from day one in service, dramatically reducing environmental impact and increasing fuel efficiency.

Keppel O&M is at the forefront of designing vessels that run on LNG propulsion systems and has the experience in LNG vessel conversions as well as the expertise in newbuild specialized vessels.


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