Matson at a loss; mortgage rates fall

By Howard Dicus - bio | email

HONOLULU (HawaiiNewsNow) - Shipping costs are rising and mortgage rates are falling as crises from Libya to Japan affect the prices consumer pay in Hawaii.

Global unrest and uncertainty have driven fuel prices higher and mortgage rates lower, while also affecting currency exchange rates and contract prices on commodities including foods.

Honolulu-based Alexander & Baldwin Inc. reported Friday that its largest subsidiary, Matson Navigation Co. Inc., expects to post a loss for the first quarter due to soaring prices for the bunker fuel that its container ships burn.

The announcement means Matson's fuel surcharges - the newest one kicks in March 27, a week from Sunday, bringing the container surcharge to 35 percent - are not yet catching up to the actual fuel bills for Hawaii's largest maritime shipping line.

"We expect to recoup a large percentage of fuel cost increases through surcharge mechanisms in 2011," said A&B President Stan Kuriyama. "However, an environment of continually escalating fuel costs could impair timely recovery of these costs."

Upward pressure on crude oil

Crude oil has risen sharply this year on speculation of supply interruptions due to Middle East political upheaval - and actual interruption of supplies from Libya - peaking recently at $105 a barrel.

The Japanese earthquake, tsunami and nuclear power plant crisis brought oil prices lower on the expectation of a slower Japanese economy that needs less oil, but by Friday the price of U.S. benchmark crude had bottomed out and risen again to $100 a barrel.

Japan gets a third of its electrical power from nuclear plants and oil traders are beginning to consider the possibility that the Japanese economy will actually need more oil to offset any nuclear power production that goes offline for inspections or improvements.

Retail gasoline prices lag crude oil price fluctuations by about 60 days and Hawaii gasoline prices have risen steadily in the past few weeks as retailer process the crude oil price increases of January.

Mortgage rates lower

At the same time, global crisis and uncertainty have sent U.S. average 30-year mortgage rates back below 4 percent this week.

Bank of Hawaii this week is quoting an APR of 3.921 percent, First Hawaiian is quoting 3.96 percent, American Savings is quoting 3.987 percent, and Central Pacific is quoting 3.919 percent, for a 30-year fixed-rate home loan, according to the Honolulu Board of Realtors.

Lenders typically bundle mortgage notes and resell them to investors in competition with 10-year Treasury bonds. When times are stable, investors are more willing to invest in riskier instruments including stocks, the Treasury has to offer a higher interest rate payback in order to make its T-bills attractive, and mortgage investments must follow suit to be competitive, driving mortgage rates up. In uncertain times when safer investments are more attractive, the process reverses.

Commodities also affected

Some trader prefer to put money into the commodities market when stocks are hard to read. Competition for commodities delivery contracts can drive prices higher as surely as can a shortage of the actual commodity, whether it's oil, gold or soybeans.

Starbucks announced Friday it is raising the price of its bag coffees an average 12 percent and blamed speculators for driving up he price of coffee on world commodity markets.

This could help Hawaii coffee growers, however. Hawaii coffees sell at a premium price, and the more commodity coffee costs, the smaller the price gap between Sanka and Kona.

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