Transportation has always been important in the islands of Micronesia, where distance and the size of the markets has historically brought challenges. Unlike the U.S. mainland or European markets there is no interstate or intercontinental road transportation and cost has always been a factor, particularly as transshipment for the islands occurs through Guam.
Since 2020, when the COVID pandemic hit, those challenges have increased to the point where every market sector is affected by the ease with which goods can arrive in the market, or with which orders can be filled.
By Maureen N. Maratita
While the challenges of the pandemic are unique, if there is a saving grace, it is that executives who do business throughout the region have always had to manage their transportation-related businesses.
Bernadette N. Valencia is the vice president and general manager of Matson Navigation Co. for Micronesia and Okinawa. She says Matson did not miss a single weekly sailing in 2020 or 2021 and the shipping line’s goal amid COVID unpredictability “is to keep all our vessel crews, landside employees and partners safe so we can continue to reliably deliver the goods” that island communities need in Guam, Micronesia and Hawaii.
The past months have been eventful, Valencia says.
“At the start of the pandemic in 2020, we saw that residents were worried and began to panic buy essential household consumables and personal protective equipment. Businesses were closing, people lost their jobs, and there was a lot of uncertainty about the future,” she says.
Matson’s priority was to ensure that its services would continue as scheduled, she says.
“Shipping is considered an essential service, and we operated with an even greater sense of purpose to ensure that shipments were on-time. The communities we serve were counting on us. During this time, the airlines also abruptly canceled regular flights, reducing air freight capacity globally for some time. Matson saw an opportunity to fill the void in airfreight capacity and added extra ships in our expedited service between China and Long Beach.”
In the previous year the challenges changed, Valencia says.
“In 2021, we saw consumer demand for home improvement, electronics, fitness equipment, and retail goods sky-rocket. This demand put a strain on the supply chain — from manufacturing to trucking and logistics. Stateside, the nation was also experiencing labor shortages, trucking challenges, and quarantine requirements due to the pandemic, and this affected the rate at which goods were delivered,” she says.
Matson is remaining vigilant in 2022, Valencia says. “We continue to monitor these external issues closely and adjust our operations as needed to minimize impacts for our customers.”
As for a steady flow of goods into the Mariana Islands and Micronesia, she says Matson expects that disruption will continue this year.
“We anticipate that supply chain challenges will be with us well into 2022. Fortunately, Matson has dedicated terminals on the U.S. West Coast and in Hawaii, which allow us to continue to work our vessels with minimal delays,”
Matson will continue to remain focused on service to the Guam shipping hub and Micronesia, she says.
“The transshipment of cargo to our neighbor islands throughout Micronesia requires a lot of communication and coordination throughout our operations, with the Port Authority of Guam, our partner carriers, and agents throughout Micronesia. I applaud our vessel crews, shoreside operations, and our industry partners for the incredible work they have done throughout the pandemic to keep the ships on schedule each week,” Valencia says.
COVID-19 brought extra responsibilities and expense to Matson.
Valencia says, “From the start of the pandemic, Matson has followed the U.S. Centers for Disease Control and Prevention’s guidance as well as all local government requirements for preventing virus transmission.
“Matson invested in medical-grade air filtration systems and personal protective equipment for its ships and offices to protect its vessel crews, shoreside employees, and customers,” she says.
The pattern of investment to maintain service is not new, Valencia says.
“Throughout the years, Matson has made substantial investments in infrastructure that help distinguish our services as the most reliable in the markets we serve. The new ships have increased schedule reliability; Matson’s on-time performance for Guam was 95% (measured within 24 hours) for 2021. Dedicated, exclusive use terminals on the U.S. West Coast and in Hawaii have allowed Matson vessels to avoid the congestion affecting other carriers. Matson’s ongoing investments in more containers and chassis equipment have kept the company’s network fluid and ensured that our customers have access to equipment when they need it,” Valencia says.
Matson celebrated its 25th anniversary of doing business in Guam, the Northern Mariana Islands and Micronesia in 2021.
Valencia says, “We remain deeply committed to supporting the islands as our communities begin to recover from the economic effects of the pandemic.
“We have enjoyed a good working relationship with our agents and partners throughout Micronesia and with the Port Authority of Guam for the past 25 years. We are committed to their success and look forward to working together to expand capacity in the region.”
Valencia is aware of the Porty Authority of Guam’s development plans.
“The Port Authority of Guam is the major entry point for all goods and services to Guam, and we fully support its development and modernization plans. The port’s operations team has done an exceptional job with productivity and discharging our ships efficiently — especially the new, larger vessels. We appreciate their partnership.”
Saipan Shipping Co. has been the agent for Matson since 1996 and is also the agent for Kyowa Shipping Co. Ltd. in Saipan.
Since June 1996, Saipan Shipping also has a joint venture with Kyowa through Marianas Steamship Agencies in Guam, also established that year.
Jose T. Quan, operations manager for Saipan Shipping, says from Saipan Shipping’s perspective ship arrivals were consistent into Saipan and the Northern Mariana Islands in 2021, compared to the previous year.
“Maybe there have been unfortunate circumstances like port congestion, but the frequency hasn’t changed,” he says.
“The major carriers that we service are Kyowa Shipping line from Asia and Matson Navigation out of Guam,” he says, which brings goods from Asia and the U.S. mainland into Saipan respectively. The amount of cargo can vary, Quan says. “It all depends. Construction material comes more from Asia, with retail items coming from the West Coast via Matson.”
Delivery of goods to clients is typically smooth, he says. “Here in Saipan, we have Saipan Stevedore – they have the necessary equipment – the necessary manpower – to offload ships upon on arrival. That has not slowed down in the pandemic – not in 2020 or 2021,” he says.
The U.S. market’s growth has caused transportation delays there, he says.
“It seems that the demand for goods has increased since 2020. That demand has put stress on the supply chain because all the retail customers in the states are trying to get goods to the United States, but they’re experiencing bottlenecks at the ports.”
What Saipan Shipping receives is varied, Quan says. “For Matson, pretty much all the containers coming off the ship are full container loads in comparison to Kyowa Shipping Lines.”
Kyowa has “a multi-cargo vessel where they are able to accept full container loads and break bulk cargos — meaning loose cargo and less-than-container loads — usually ranging from vehicles to large pallets of cement to rebars.” Most of the breakbulk cargo is construction materials,” he says.
Saipan Shipping services the other islands in the NMI. “We have the MV Mariana — that’s one of the smaller ships, which we use to service the domestic islands within the CNMI – Tinian and Rota. Saipan Shipping is the agent for this vessel,” Quan says.
Retailers have seen issues, that Saipan Shipping has assisted with.
“Let’s say they order five pallets of toilet tissue. When that does come, they get two, three at most. It seems this past year that’s one of the types of problems … we’re having to manage.”
In 2022, Quan says there is continued uncertainty. “The mindset at Saipan Shipping is to hope for the best. We really don’t know how this year’s going to turn out to be.”
He aims to remain positive, he says. “I like to stay hopeful and hope that if anything that this year will be a better year.”
The first positive cases of COVID-19 began in Saipan in October. Quan says, “It was only a matter of time before this was going to happen.” As operations manager, he has been concerned with contingency plans and scenarios of spread of COVID. “Ultimately we’re still in the pandemic and that’s the kind of effect the pandemic could have within the shipping industry in the ports.”
Quan also deals with COVID protocols and guidelines, and how they will be implemented at the seaport. “It’s a matter of having to decipher and navigate through these regulations so we’re not breaking any rules.” The regulations also pertain to crew members onboard ships.
On behalf of Saipan Shipping, Quan says, he is grateful for the partnerships Saipan shipping has. “Without them and their teams, I’m sure things could be much worse.
… Obviously, Guam is a transshipment hub for Saipan and the CNMI for the West Coast. We are grateful for the steady work of everyone within each region and island. Without them it would be a different dynamic.”
APL has been concentrating its expertise in Guam and the Northern Mariana Islands, although its group is planning for the future, according to its general manager.
Charlie Hermosa says “2021 was a challenging a year, much like the second half of 2020. While the world was trying to better understand and properly readjust the supply chain, we looked deep into all aspects of our operations and began implementing creative solutions for our customers.”
Those solutions include an initiative aimed squarely at supply change challenges, he says.
“As a subsidiary of the CMA CGM Group, we achieved recognition from President Biden with the announcement of our Early Container Pickup Incentive Program, which launched in December 2021.”
According to CMA — which announced the initiative on Nov. 30, “The incentive will be provided to importers that pick up their containers via merchant haulage from all terminals in Los Angeles and Long Beach in the first eight days, with the intent that they will use it to offset costs incurred by tensions on their supply chains.”
Running from Dec. 1 for 90 days, with incentives of $100 per container for daytime pickup from Monday to Friday and $200 per container at night and at weekends, CMA estimates that the incentive could exceed more than $22 million in the 90 days.
Hermosa says, “This valuable incentive continues to help alleviate the container congestion issue in the ports of Los Angeles and Long Beach.”
One investment will position APL for the future in the U.S. mainland.
CMA announced Nov. 3 the acquisition of $2.3 billion in assets in Los Angeles.
“We also strengthened our infrastructure with the group’s purchase of Fenix Marine Services, one of North America’s largest deep-water terminals. The acquisition of this state-of-the-art, 292-acre facility will support our rapid growth in the United States, position us for the future and enable us to provide a superior level of service to our customers,” Hermosa says.
As transportation saw supply issues come to the fore, the group acted in a variety of ways, he says.
“APL and CMA CGM took swift action to improve supply chain fluidity for our customers. This included strengthening our operations teams throughout North America and expanding our existing customer care teams. The group also boosted deployed capacity by 27% to keep up with the continued import surge into the United States and increased our chassis fleet to over 5,000 in Southern California — five times previous levels — to be able to more efficiently expedite cargo out of the FMS terminal.”
Hermosa says APL was no less diligent in the islands.
“Locally on Guam and Saipan, we worked closely with customers who needed to adjust their supply chain by looking for new suppliers throughout the world. This allowed them to continue to replenish their inventory and service their customers,” he says.
While the shipping industry is still not without challenges in Micronesia as it heads into 2022, Hermosa says APL will continue to find solutions.
“You can expect a lot more of the same innovation and entrepreneurial actions to continue for the region in 2022. Our commitment to Guam and the [Northern] Marianas will only grow in the coming years, and we’re excited about the potential this coming year has to offer.
Globally, the CMA CGM Group is investing in vessels, logistics infrastructure, airplanes and supply chain innovation to continue bringing the best possible end-to-end solutions to our clients and to remain a world leader in shipping and logistics.”
Triple J Enterprises Inc. has variety of subsidiaries that do business in the auto industry and carries a variety of auto lines.
Jay. B. Jones, senior vice president at Triple J; says in 2020 – particularly the second half of the year auto market remained strong. “We had a good supply of vehicles and obviously a good supply of customers with a lot of the stimulus funds that were being put out in the community.” The following year he says, the picture changed. “As the year went on, supply became more and more of an issue.”
Triple J is the dealer for Acura, Ford, Honda, Kia, Isuzu, Lincoln, Mazda and Volvo lines. Jones says, “We were lucky because we had so many brands. We usually had one or two brands we were able to get products from. … We were juggling between brands and what was available.”
Depending on what brand and what model, vehicles come from Korea, Japan and the U.S. mainland, he says. “It’s really a mixed bag as far as where the supply is coming from.”
Triple J was affected by the lack of vehicles, he says. “There’s no doubt we could have sold more vehicles if we had them.” However, he says, “We had dual pressures – a booming auto market in the U.S. combined with the chip shortage. Both of those things conspired against us to cause vehicle supply problems.” Vehicle parts were also affected, Jones says. “We struggled to get a lot of the electronic parts that customers needed for their cars.”’
Across the industry dealers are seeing vehicles arrive without certain features, to include Triple J. “Manufacturers are happy to supply a lot of base models or mid-grade vehicles, but the high-end vehicles with a lot of features – a lot of electronics – those are much to get a supply of these days.” For example, Jones says, “We may have [Ford] F150s, but we don’t have the F150 that people are looking for.”
Though those challenges existed throughout 2021, they were especially noticeable in the last half of the year, he says.
Vehicles are a necessity in the islands. “You really don’t have any choice but to have reliable transportation when you’re living in Guam or the CNMI,” Jones says. “Obviously we don’t have the same access to public transportation that a lot of places do.”
Demand has been equally strong in Guam and the Northern Mariana Islands, he says. Guam’s demand has been more consistent, whereas in the NMI sales have varied by month, but have been “definitely strong.”
As 2022 begins, there is further pressure from the U.S. market, he says.
“Because the supply is so short, dealers in the states are marking cars up over MSRP [manufacturers suggested retail price]. People are paying $10,000 over MSRP for cars, because they are so hard to come by.” That figure has risen to $20,000 on high-end, hard-to-come-by vehicles, he says.
“I haven’t seen that happening on Guam,” Jones says.
According to Cox Automotive, average transaction prices in November set a record for the eighth consecutive month in the U.S. mainland.
As to an expectation among potential buyers that prices will rise on vehicles in 2022, he says, “The pricing of everything else is going up; demand is super strong, so it would make sense that manufacturers would raise their prices.” Aside from costs such as gross receipts tax and freight, he says, “We use the MSRP as the basis for our pricing. That’s what all of us are using as the basis for our pricing.”
Jones says he thinks demand will remain fairly strong in 2022. “For consumers, there’s no reason to expect the supply won’t continue to be a problem – at least for the first half of 2022, just based on the things that we’re hearing from our manufacturers. I don’t see any reason to believe this is a problem that’s going to go away. It’s something we’re going to gradually work our way out of over the next year.”
For the most part shipping companies have been consistent, he says. “There have been one or two times that we were not able to get the products that we needed out here as quickly as we would have liked. I think they were under a lot of pressure as well – from the construction industry, every industry – to move products across the ocean.”
While there have been challenges, Jones says, “We’re getting the job done. We haven’t been paralyzed by anything.” Customers have been patient, he says. “They see the same challenges in other aspects of their lives. We’re all in the same boat together.”
The petroleum industry in our region is as essential to our businesses and consumers in the islands as their vehicles are.
ExxonMobil Corp. does business in Micronesia as Mobil Oil Guam Inc., Mobil Oil Mariana Islands Inc. and Mobil Oil Micronesia Inc.
Jimmy T.C. Hau, president, says, “Mobil is a leading supplier to the key industries on the islands, with the largest number of service stations in Guam and the Northern Mariana Islands. We have been supplying fuel to Guam for over 70 years and strive to reliably supply the communities in which we operate with quality fuels, so we understand the importance of fuel availability to the island communities.”
COVID 19 has affected the transportation industry also, he says. Mobil operates 20 stations in Guam. 11 in Saipan, two in Rota, one in Tinian and six in Majuro.
“While the pandemic has impacted supply chains, Mobil has been overcoming challenges by leveraging ExxonMobil’s integrated fuels value chain and logistics expertise to provide reliable supplies of gasoline and diesel to customers in Guam, the Northern Mariana Islands and Micronesia,” Hau says.
Convenience stores are a familiar part of gas stations in the islands — as in the U.S. mainland and other countries and are meeting the needs of “on the go” purchases.
Hau says, “The prolonged impacts of the pandemic have affected the community, whose needs have changed in the last two years. In addition to implementing safety measures and upgrading our service station facilities, we have also been adapting and increasing our convenience store offerings in response to our customers’ needs. For example, Mobil service stations now carry a wider range of products including masks and hand sanitizers. We also continue to work with vendors and suppliers to bring better value offers to drivers and motorists.”
All islands have been affected by the lack of visitors with the impact of shuttered businesses evident in the Northern Mariana Islands — and in the island of Guam economic uncertainties will continue in 2022, Hau says.
“The island’s economy has been and continues to be affected by the pandemic, most notably by the lack of tourism. Fewer visitors to the island and safeguards to reduce COVID19 transmission in the community have affected local businesses and also led to a lower demand for fuel products.
“However, we remain focused on our commitment to provide reliable supplies of quality fuels to our customers and will respond to changes in demand. We will also continue to adapt and improve our service offerings to deliver greater value and convenience to our customers in a safe environment.”