Oil cripples the fiberglass boat market, but 'opportunity' is huge for aluminum vessels
With the Deepwater Horizon oil leak still not fully capped, a cloud of dashed expectations hung over boat dealers in southeast Louisiana in mid-July. But as tricked-out fiberglass fishboats gathered dust in showrooms, demand for aluminum boats for the BP oil cleanup was exploding.
"It has been totally overwhelming," says Bruce Stone, co-owner of Lobell's Custom Boats, a small aluminum-boat manufacturer in Prairieville, La. He has fielded an avalanche of phone calls for his boats to work as "vessels of opportunity" in the Gulf of Mexico oil cleanup. One boom company, U.S. Containment Boom, was advertising on the Internet for 100 boats - aluminum only - for rent, sale or hire in Mississippi and Alabama for deploying booms.
"We had one call from someone who wanted to buy 50 30-foot barges," says Stone, whose company builds rugged welded-aluminum cabin, utility and barge boats. "We've had multiple calls for 50 or more boats." The boats have to be aluminum, which Stone can deliver, but the callers also want the vessels "right now." He can't perform miracles. "We have the capability to build maybe five or six boats at a time," he says. As soon as the callers hear that he doesn't have 50 in stock, they hang up. "I think they must be speculators," he says. Or contractors.
"The [recreational] fiberglass business is on its back," Stone says. "People can't take their boats down to the Gulf. They're afraid to go there because of the oil."
So they aren't buying.
A new market
Ordinarily in midsummer, anglers by the hundreds would be launching out of the fish camps and small marinas dotting Louisiana's bayou-laced southeast coast to catch speckled trout, redfish and snapper. Not this year. On Grand Isle, where the marinas should be packed with sportfishing boats and anglers barbecuing with their families on the dock, boat dealer Tracy Palmisano sees row after row of aluminum workboats loaded up with bright orange vests and construction hats, hoses and pumps, and all manner of "contraptions to soak this oil up."
Palmisano, owner of The Boat Yard, a big used-boat dealership south of New Orleans that usually sells sport and fishing boats, says he saw his new market at Grand Isle. "I've got a totally different type of customer now," he says.
In early July, Palmisano said he hadn't sold a boat for Gulf fishing in two months. But he has revived a company, Gulf Marine Recovery LLC, that he created after Hurricane Katrina to sell boats for the post-hurricane recovery. Now Gulf Marine specializes in aluminum boats for sale or lease to haul workers, booms, oil storage tanks and pumps for the oil-spill recovery.
"It's a good thing we're as versatile as we are," he says. "We're trying to do workboats now. ... Oh, man, we're rolling with the punches down here."
Palmisano buys used aluminum hulls - most of them pleasure boats from 20 to 30 feet - repowers them and puts them on trailers. But the inventory of aluminum boats (new and used) in the region is exhausted, he says, so he's buying boats new now from a small builder in Arkansas. He also is assembling for himself a fleet of 10 skimmer boats that gather the oil with booms, then suck it out of the water. He says BP will pay him $2,000 a day per boat. "That's 20 grand a day, seven days a week," Palmisano says. "That's what I'm working on. That's where the future is." At least for now.
Demand is now
Sea Ark Marine, a Monticello, Ark., aluminum boatbuilder, also has been swamped with calls for boats to be used in the cleanup, says Ken McFalls, vice president of sales. "It's a madhouse," he says. "We're getting 20 calls a day. ... What we are finding is individuals are just coming out now and forming companies" and looking for boats to put into service. Typically, buyers are looking at Sea Ark's 25-foot trihull for deploying booms or its 30-foot barge for transporting them.
McFalls says Sea Ark has bumped up production 50 percent to meet demand, but the company promises delivery in 90 days, which isn't fast enough for most of the shoppers, who are impatient to sign cleanup contracts today. Because of that, he says, "We haven't gotten the first order yet to build a boat."
With sludge or tar balls washing ashore along a 550-mile swath of Gulf shoreline from Galveston, Texas, to the Florida Panhandle, the lure of big profits in working the cleanup is powerful. A BP rate sheet for vessels of opportunity issued in June offers $3,000 for a 24-hour day for vessels over 65 feet; $2,000 for 45- to 65-footers; $1,500 for 30- to 45-footers, and $1,200 for vessels less than 30 feet. Crewmembers, who must be trained, receive $200 a day.
Most Louisiana dealers have not profited in a big way from the run on aluminum boats unless they were carrying a large inventory of "tin" boats over 24 feet when the Deepwater Horizon rig exploded in April, causing the massive spill - the largest in U.S. history - and spawning what also may be the biggest cleanup.
"I will say this: We've seen a little bit of business from the carpetbaggers," says Todd Knaak, sales manager at Cypress Cove Boating Center in Slidell, La., on Lake Pontchartrain. "It seems like a lot of people from all over the country are coming down here to do oil spill recovery and get rich on that BP black gold."
Knaak says vessel-of-opportunity wannabes go out and find "any old piece of junk," repower it and go to work for BP. That has given Cypress Cove some repowering sales and an uptick in repair work, but it hasn't come close to making up for the loss of boat and engine sales to anglers and sportboaters, who are sitting this summer out.
Knaak says hard-core anglers fish for redfish and speckled trout on Breton Sound, where fishing still is permitted. But, he notes, the "recreational guys" - the weekend commandos - are "sitting tight. ... Where normally we're selling seven to 10 boats a week, now we're selling a boat a week." Usually Knaak could expect to deliver four or five boats the Friday before the Fourth of July alone. This year he delivered none. He expected to be in the showroom the Saturday before the holiday - cleaning it up.
"Boat sales are just dead," he says. The challenge for Gulf Coast dealers is to hang on long enough to see those sales revive, he says. That likely won't happen until Louisiana's Gulf Coast is attractive to anglers and boaters again. Though BP has used fiberglass boats in the cleanup, "they're shying away from them now," Knaak says. "The hulls are getting stained. The guys using these boats put claims in on them. BP doesn't have to worry as much about [claims for] aluminum boats."
Wayne Thibodeaux, manager at Gulf Coast Boats in Lafayette in south-central Louisiana, hasn't seen the pleasure boater get back in the action this summer, either. "Over the last three weeks, I've had to lay off three people," he says. "I don't know whether that's from the oil spill or not, but it certainly has affected sales of our bay boats. No one's looking at them at all."
Thibodeaux says the weak economy is still a big factor in depressed sales, along with fears of a moratorium on oil drilling. Many of his customers work for oil-service companies.
"That's the heart of our industry here," he says.
Gulf Coast Boats also has benefited from the BP cleanup. "I just sold a used motor and I'm getting three boats ready to get involved in the cleanup," says Thibodeaux. "There are going to be thousands of boats involved in that for some time."
At last report, BP had deployed a fleet of more than 6,500 boats. Yet the business Thibodeaux has seen from this deployment is not enough. "It's a struggle," he says.
On the Louisiana coast, the marinas and fish camps - lodges with docks - also were shifting their focus from boating and fishing to oil cleanup operations.
"It's a different business now down here," says Bob Sevin, a spokesman for the Bridge Side Marina on Grand Isle. There would be no fireworks on Grand Isle this year (the beach was closed and the fire marshal had decided that fireworks and oil on the beach don't mix). There would be no fishing tournaments. At the marina, "We had to get rid of the fishing gear and stock up on work boots and hard hats and life preservers," he says. Fire extinguishers have been a hot item, along with gasoline cans and engine oil. And fuel sales have been brisk, too. Bridge Side is berthing some vessel-of-opportunity boats, but not enough to make up for the normal crush of pleasure boats at the height of the summer season. Its lodge, however, is full with cleanup crews. And BP plans to rent 70 or 80 RV lots at Bridge Side and put trailers on them to house more of its crews.
"Filling that RV park up this late in the season is OK, but we're still taking a beating," Sevin says. "It beats the heck out of [lying] empty, though."
Knaak says Cypress Cove's marina and lodge in Venice also are bringing in revenue from the cleanup. "They're doing OK, but they miss the recreational fisherman," he says. "No one spends money like the recreational fisherman."
Cypress Cove's 65-room hotel is packed with cleanup workers and its 200-slip marina is berthing workboats and sportfishing yachts chartered out to film and TV crews, but the marina still isn't as busy as it usually is in the summer, when it's packed with tournament boats, Knaak says.
If the surge in demand for aluminum boats is one silver lining in the dark cloud hanging over the Gulf this summer, another is the $20 billion claims fund BP has set up to compensate businesses for lost income. In July, BP reported $147 million paid since April on 47,000 claims, out of 95,000 filed. Knaak says BP has been vigilant about getting the documentation it needs to verify claims to prevent fraud, but he is satisfied with the process.
"If your claim is cut and dry, they'll cut you a check right away," he says. "If it's a more involved, out-of-the box kind of thing, it may take a little longer."
The Boat Yard's Palmisano thinks this money - plus other costs, estimated at $3 billion by early July - could turn out to be "a great stimulus package" for the region. He said his business boomed in the two years after Hurricane Katrina with all the recovery money flowing in. He thinks the BP money could help fire up a similar recovery, but he's not so sanguine about the recovery of fishing in the Gulf.
"The fishing part of it is shot, at least for now," he says. "I've got a 5-year-old son who loves to fish." He thinks he'll be introducing the boy to hunting soon.
This article originally appeared in the August 2010 issue.