Russia’s invasion of Ukraine has created numerous problems that will force the marine industry to adjust and adapt yet again, even as it continues to work through supply-chain and other challenges from the Covid-19 pandemic.
At least one Ukrainian boatbuilding facility was shelled, and others in the region lost employees who were displaced. Economic sanctions on Russia resulted in government seizures of oligarchs’ superyachts in Europe and drove prices higher for oil and metals everywhere.
At least two major boatbuilders in Ukraine suspended operations. BRIG, one of the world’s largest producers of rigid-hull inflatables, has its primary production yard in the river district of Kharkiv, an early invasion target. The yard’s employees fled to the countryside; as of this writing, the facility did not appear to be severely damaged, but production had ceased until further notice.
“The highest-priority task for us is to secure almost half a thousand of our employees and help them take care of their families properly, which is not so trivial, given those genocidal warfare methods carried out by Russia,” according to a statement from the builder. “Also, we are focused on preparations for a fast return to normal or even increased production volumes after the inevitable victory of Ukraine.”
In the same district is fellow RIB manufacturer Grand Inflatable Boats. In social media posts in March, the company said its facility was “unharmed” but will fail to have any output for the time being.
“Some of us have joined the military; some are helping in the humanitarian area,” the company wrote. “After these temporary problems, we will resume the production and will fulfill all the agreements.”
Finland-based Axopar Boats suffered a slowdown in production after Ukrainian employees in Poland returned to their hometowns. The boatbuilding cluster around Augustow, Poland, is near the Ukraine and Belarus borders. “They have a lot of Ukrainian workers who have returned to defend their motherland or to be with their families,” says Axopar founding partner Jan-Erik Viitala. “The region where we build our Axopars is also the region that has taken in the most refugees. We are trying to help them with commodities that are missing, like appliances, fridges, washing machines.”
Viitala says production is now “stabilized,” but output may be a bit slow as the war continues. “We have been able to fill some of the void [with workers] from some other activities in the region that have slowed down, but that may be just temporary, and we will be facing additional delays,” he says.
Viitala says approximately 30 percent of the blue-collar workers in the Polish region’s boatbuilding industry are Ukrainian, and their absence is affecting suppliers ranging from woodwork to canopies. Upholstery became unavailable from one Hungarian supplier, he says, because Hungary’s government ordered upholstery shops to start emergency production of mattresses for refugees.
(BRIG and Axopar have established foundations to aid displaced employees and refugees. To donate to the BRIG Family Foundation aiding Ukraine, visit gofundme.com/f/the-brig-family-foundation.)
Russia also is a producer of recreational boats for export, notably aluminum fishing boats. International sanctions mean Russian builders will not be able to do much business in neighboring nations. The same sanctions resulted in the seizure of yachts reportedly owned by Russian nationals while the yachts were in Croatia, Italy, France and Spain.
Yacht builders, repair yards and charter operators will feel some of the fallout, including the question of whether they will be paid for services rendered, says Thom Dammrich, former president of the National Marine Manufacturers Association and now a North America regional expert with the Global Marine Business Advisors network. “It is probably most disruptive to the superyacht market,” he says. “You have superyacht manufacturers who have boats under construction for Russians, and now manufacturing has to stop on those boats. Refit yards all over the world servicing superyachts have Russian vessels in their yard. They have space taken up, and they can’t do any work, and they have nowhere to go with these boats.”
In North America, the Ukraine crisis has triggered higher gasoline prices and threatens access to raw materials — on top of existing supply-chain constraints from the pandemic on everything from pipe fittings and valves to electrical wiring and teak. Ukraine and Russia are global suppliers of steel products, aluminum and industrial minerals.
In Somerset, Mass., Fortier Boats is constructing 26- and 30-foot boats. Both are awaiting components that owner Rod Fortier says are overdue. For example, arrival of 1-inch-diameter steel tubing for the fabrication of bow rails is slow, and delivery of resin and fiberglass “is not as fast as it once was,” Fortier says. “It’s the long lead times — like 10, 12 weeks — for items that I think should be on the shelf. Propeller shaft boxes, stainless steel — I’m ahead of that curve, but it has become a problem” for future deliveries.
“Everything’s going up, no doubt about that, and everything is taking a little bit longer to get,” Fortier adds. “It’s the oil prices, and I’m bothered by the surcharges they put on for the delivery of stuff.”
Larger boatbuilding operations are trying to use their scale and relationships with suppliers to soften the blows. “The topic of 2021 was, of course, supply-chain issues, and we enter 2022 with continuing supply-chain tightness and inflation,” Brunswick CEO David Foulkes said about three weeks after Russia invaded Ukraine. “We are not at all complacent about this situation, however, and will continue to execute our strategy of pursuing a combination of vertical integration and reinforcing our relationships with” Brunswick’s global suppliers. The company is in the process of vertically integrating more than 30 product lines to become even more self-sufficient.
Availability of raw materials for boatbuilders may persist, according to NMMA, which is predicting further constraints on the global supply chain for steel and aluminum.
Dammrich says consumers may respond to high gasoline prices by doing less boating. “We have seen gas prices spike significantly, and they could go higher if this war lingers on,” Dammrich says. “We’ve been through periods of high gas prices before, and it does impact consumers’ use of their boats, and it has an impact on consumer demand for new boats.”
At the same time, the recreational boating industry is still in a position of relative strength. Fortier, as with many builders, says his yard is booked solid until spring 2023, with all 2022 stock presold.
“The biggest warning I have is don’t be complacent,” Dammrich says. “Don’t assume that things are just going to ride along. You need to do some contingency planning if boat orders start to get canceled. This war wasn’t in the crystal ball six months ago.”
This article was originally published in the May 2022 issue.