For the most part, companies in the marine and yacht coatings market were pleased with 2004, and they say prospects are good for the coming year based on newbuilds and refurbishment schedules. Marine coatings manufacturers continue to roll out new products, set up international offices and win new contracts in key regions.

But it hasn't been all smooth sailing. The rising cost of raw materials has been a drag on profits, much like barnacles on a hull. Unfortunately for coatings manufacturers, there's no sloughing off these escalating costs, and there's little relief in sight.

In its annual report for 2004, Hempel reported that a 20% increase in raw material prices, and higher costs of product regulation took "some of the shine off a record year" in its marine business.

"Raw materials have increased so rapidly. It's been a problem," said Anders Braekke, product group manager topcoats-worldwide with Jotun, a leader in the marine coatings marketplace.

Rising costs are also impacting smaller players in the marine coatings sector. Altex Coatings Limited of New Zealand is forecasting 10% growth for 2005-06, due mainly to docking cycles. However, according to Ricky Collins, national sales manager, higher material costs are hitting hard.

"Raw material increases impacted on the profitability with returns being lower," said Collins, who noted that Altex has upped its own prices slightly but has been unable to pass along all of the increases to its customers. "Market forces will not allow major increases," he said.

The yacht coatings market is also being impacted by skyrocketing raw material prices.

"Copper is about 75% of our raw material cost, and the price of copper has doubled over the least 18 months," said John Ludgate, vice president, sales and marketing, Pettit Marine Paint. "This was in addition to resins, solvents and even cans going up dramatically."

In addition to higher raw material prices, Mother Nature often plays a major role in the yacht sector, as four hurricanes hit Florida and the southeast U.S. in 2004.

While hurricanes and other natural disasters usually provide a quick bump in sales for all coatings, there's more lag time in the marine market.

"Although the damaged boats will eventually be fixed, there is a long delay as people and insurance companies want to get the houses repaired first," Ludgate added.

In addition, storms severely affected marinas and boatyards in the region, and the outcome is changing the market. "The worst part of the hurricanes is that many boatyards and marinas were destroyed and have sold their land to real estate developers rather than rebuild," said Ludgate.

A BOOMING NICHE: THE MEGAYACHT MARKET
One area seeing growth in marinas and shipyards is the megayacht/superyacht market. Bolstered by economic prosperity and the increase in chartering and yacht sharing enterprises, megayacht building is on the rise. According to ShowBoat International's 2005 "Global Order Book," since 1997, the global market for luxury yachts has more than tripled. Italy remains the largest builder nation, with 249 superyacht projects, followed by the U.S. with 97. Leading builders-Italy's Azimut-Benetti Group, L�rssen of Germany and Trinity in the U.S.-craft ships that are the pinnacle of opulence, boasting luxurious accommodations and top-notch technology. Needless to say, painting them is an expensive endeavor as well.

According to Paul Miller, director of underwriting at Underwriting Risk Services in London, for a "typical" $25 million, 50-meter motor yacht, paint represents about five percent of the cost. And that price can rise depending on what the builder/owner specs. "Everyone wants to have the shiniest boat in the marina," said Miller.

In fact, megayacht owners and builders are putting their own unique spin on their vessels, often taking a cue from the auto sector in terms of style and appearance. "They expect it to look like the finish of their car," commented naval architect Mitchell Gibbons-Neff, president of Sparkman & Stephens, Inc., operating in New York and Ft. Lauderdale, FL.

Some industry insiders told Coatings World that with forecasted growth in new megayacht construction, as well as repainting opportunities and refurbishment, the market for megayacht coatings could post growth of more than 25% over the next two years.

Numbers like that are reeling in coatings companies. For example, Pettit, Boreo Colori of Italy and Altex Coatings have joined forces to serve this niche market, which operates on a global scale.

"Boero has been very successful with painting the large superyachts manufactured in Italy, many of which have U.S. owners and end up in Fort Lauderdale," said Ludgate. With the SuperNavi transoceanic yacht coatings brand, which was launched in 2003, the trio's goal is to provide a "worldwide network of compatible coatings for large superyachts which travel the world."

MARINE MARKET MANEUVERING
On the marine side of the coatings market, companies are bolstering their business by winning new contracts, carving out stronger positions in key markets and launching new products.

International Paint-which recently inked a major deal in China (see page 8) and officially opened International Paint Japan in late 2004-has been selected as the sole marine coatings supplier for the Royal Navy Type 45 Anti-Warfare Destroyer Program. It is working with BAE Systems on as many as eight ships due to enter service by 2014. International contends the total value of the accord is �2.4 million.

Ameron has also changed course in the Asia-Pacific marine coatings market, taking the helm in Korea by opening a Busan branch in March. Han Jin, which had been the company's Korean licensee, will now manufacture for Ameron under a toll manufacturing agreement.

For Jotun, a key to success has been its position in markets such as China and Southeast Asia, and a continuous focus on developing innovation solutions that answer the needs of its diverse customer base. This year, the company will be touting two new major products: SeaForce 60 and Hardtop Flexi.

SeaForce 60 is a self-polishing technology which fills a price gap for Jotun and offers an alternative for smaller vessels that won't benefit from the self-smoothing effects of the company's well proven SeaQuatum offering. Hardtop Flexi is a new polyurethane, which Braekke contends is far more flexible than others in the market, and was proven in a five-year test prior to launch.

Extensive testing is essential in the marine coatings market; products that don't deliver on their promises prove to be quite costly for the users, and can sink a marine coating company's reputation.

"The marine industry is conservative," said Braekke. "You have to prove to these customers that the product really works. Nobody wants to be a guinea pig."