Business is Booming Down Under but Challenges Exist | MaryAnne Edwards, GMBA New Zealand & Australia

The marine industry down under like most global markets continues to do well with high demand and significant business transactions across most sectors with the industry expecting a huge summer season. Both countries also have an ongoing Discover Boating Campaign designed to attract more of the population into the recreational boating market.

It is also very exciting to see a marine industry player, Riviera, as a finalist in the 2021 Australian Export awards showcasing the resilience of the marine industry and its importance to the Australian economy.

Riviera have exported a significant number of vessels to the US recently. Currently around 50 vessels are being built in the Coomera shipyard which employs 900 people. The success of Riviera which has continued during the pandemic is indicative of what has happened in the vessel manufacturing sector in both NZ and Australia.

However, the tentacles of covid have frustrated importers and exporters with border closures, lockdowns, extended lead times, freight costs, limited movement of vessels, reduced manufacturing capacity, pricing of raw materials and staffing. The good news is that with high vaccination rates now achieved in most states of Australia, NSW and Victoria have opened their borders without quarantine allowing fully vaccinated people to move freely between states. Queensland is expected to follow suit on the 17th of December then allowing vessels and crew in these 3 key states to move around freely. Western Australia continues to maintain a strong stance stating they will not open borders until their population over 12 years is 90% vaccinated. The federal government has opened Australian international borders for fully vaccinated residents to come and go which again is a big plus for everyone coming into the Xmas holiday season. As covid rules change daily it is important to check the Australian government website that lists updated international border rules, exemptions, and restrictions.

The NZ border currently remains closed but again the NZ  government is reviewing these decisions regularly so it is important to check .  Whilst NZ & Australia originally pursued a zero covid strategy both are now strongly focused on vaccination levels.

Businesses continue to work hard to maintain high service levels to their domestic and global customers. Relationships are critical and loyalty to these relationships continues as a high priority.

In both NZ and Australia freight costs have increased. Duthie Lidgard, Catalano Shipping Services NZ, commented, “As an agent we are seeing a minimum of 20% increase across the board. We are seeing many sea freight orders being bumped due to over booking, lack of ships and space. We understand yacht transporters also have a long waiting list for vessel bookings to move yachts around the world.”

In Australia feedback suggests these increases in freight costs are even greater with the same delays applying. Peter Dowdney, Australasian Sales Manager, Ronstan International, commented, “Freight can be a logistics nightmare causing many businesses to increase stockholdings as opposed to the traditional JIT method. Ronstan normally air freighted all orders however due to minimal flights out of Australia and elsewhere we have had to revert to sea freight. This is challenging with delays often of 2-3 weeks with little explanations as to why. This has affected our service levels to customers which is a huge concern for us as service within Ronstan is a high priority.”

Supply chains in many sectors of the industry have been disrupted. Given cash flow and other challenges many manufacturers are requiring payment ahead of time before receipt of orders. Customers in the main appear to be understanding of this and complying. Relationships with suppliers is critical and nurturing long term relationships is important. Trying to source new suppliers and do due diligence on them without being able to travel and meet face to face is again a very challenging exercise. Duthie advised, “NZ is starting to see limited stocks, engine and pump parts, steel, plastics etc, with word from some major brands we could be seeing a 9-month supply delay, advising to order your parts now.”

There continues to be staff shortages across many industries in New Zealand and Australia and this is also felt within the Marine Sector – Welders, Engineering, Boatbuilders, Painters, laminators etc. Superyacht Australia, the Marina Industries Association and the Boating Industry Association in Australia and NZ Marine in New Zealand have developed marine industry employment websites as a membership benefit which is certainly a very timely initiative for the industry in both countries.

Tracey Stevenson, Lloyd Stevenson Boat Builders NZ, talked about staffing. “The staffing issues are getting worse as the closed borders continue to mean that we cannot accept applicants from offshore. As all manufacturing businesses are experiencing shortages, this puts more pressure on the ability to retain staff. We are fortunate to have a loyal and stable core team – but the pressure is mounting. Our recent government decision to grant residence visas to work visa holders currently in New Zealand is a good step in the right direction – but a bit too late for some of our workforce who had already decided to head home as they were unable to visit family and had no pathway to bringing family to NZ.”

Suzanne Davies, CEO Marina Industries Association, corroborated this view in relation to staffing. “As the industry is starting to gear up for a busy summer which will be less impacted by restrictions given the increasing vaccination rates, the industry is struggling to secure staff for many roles. It is hoped that the winding back of government payments to individuals translates into a greater number of people seeking work opportunities.”

The refit market in both countries is solid although in Australia with state border closures, vessels moving between states has been challenging. Project delays create challenges for scheduling. Many businesses advise that they are struggling to secure contractors on smaller projects as there are so many larger jobs available where they would rather focus their efforts. Feedback is advising forward planning is critical to lock in contractors.

Tracey also talked about the inability to travel to see customers and attend trade shows. “At this stage, the inability to travel has not had an enormous impact, however, as we move forward, I can see this becoming a major issue. Selling our product offshore involves building relationships. There is a fair amount that can be done remotely but nothing beats meeting in person when negotiating a new project.”

Given the latest changes to border regulations Superyacht Australia was able to have representation at Ft Lauderdale with CEO David Good flying the Australian flag. It is expected there will be a NZ and Australian presence at METS this week. Many companies have international distributors who will represent them but for those who cannot be there it is important that the flag continues to fly for businesses down under.

Peter Dowdney talked about having diversified markets, i.e., offering products to multiple regions and multiple sectors. “Ronstan is well established in both the sailing market and various commercial sectors, and this has always been a valuable strategy. Our traditional sales of 1/3 Asia, 1/3 USA and 1/3 Europe has continued through the pandemic, with sales into China increasing considerably for our commercial sector. One area however that has affected a segment of our business and many others is the cancellation of so many regattas and sailing events.”

Suzanne reinforced this view. “We have again recently seen the cancellation of several yacht races and regattas in Far North Queensland, including the Australian Yachting Championships, due to boarder restrictions with most fleets coming from the southern states. This influences all businesses.”

Suzanne provided an update in relation to marina operators and ancillary services, “Many marina owners and operators are also experiencing very strong demand for permanent vessel storage.  The fortunes aren’t universal however and will depend upon the location and the market that the marina is reliant upon.  While business in NSW and Southeast Queensland is booming, those operators that rely on tourism, particularly those in North Queensland are having very different experiences. Marinas in that part of the world have seen many of the tour operators whose businesses were based at their marinas close, and for those left, many are not yet operational and are not able to pay marina fees.    Additional demand for new vessels, very strong trade in second-hand vessels and the increased usage of boats in the areas where boats can be used, is generating increased demand for the servicing of vessels. While some operators are reporting very strong business conditions, it is certainly far from industry wide. Depending on location, restrictions have hindered access to vessels, meant that certain trades aren’t able to move around freely and many owners unable to deliver their vessels for maintenance. Furthermore, the Covid Safe business practices have added additional cost for business operators particularly around monitoring of compliance and social distancing of workers. “

Whilst there are challenges which businesses & trade associations are working to address, the positives outweigh the negatives. The push now in both NZ & Australia is to get a high percentage of their populations vaccinated as the key to returning to some form of normality. Both countries have major boat shows and conferences scheduled for 2022.

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Maryanne Edwards
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