Hill Robinson Offers Guidance over Supply Chain Issues

Whilst the superyacht industry in many senses is booming with an increasingly high number of project commissions, this has led to shipyards filling rapidly with an insufficient number of skilled subcontractors to meet their client’s demands.

However, it is not the lack of personnel that is of primary concern to Kevin Laverty, Director of Projects at Hill Robinson, but rather the scarcity of parts and pieces that are required to build superyachts.

“The effects of supply chain disruption appear to be global, and this perhaps reflects the fact that the wider superyacht industry relies upon a relatively small number of suppliers with some products considered as ‘industry standard’,” Laverty told Superyachts.com.

Sharing his market observations going into 2022 on the Hill Robinson website, he indicated that the worldwide shortage of silicon chips is alarming due to its impact upon the supply of electronic goods.

As a consequence of the supply chain issues, Laverty believes that “raw material cost increases are already translating into increases in prices for finished goods.”

He notes that the increasing price of raw materials, most notably aluminium, which makes up 40% of the a yacht’s metal make up due to it being a popular choice for the construction of a yacht’s superstructure, can have an astronomical effect on final costs.

As well as the impact on costing, Laverty notes the delays caused by problems in the supply chain.

Having already observed “longer lead times from purchase to delivery”, he believes this trend will continue, advising clients to “expect a longer build time”.

The yacht management firm’s Director of Projects made some further predictions based on these trends.

He said: “We can envisage a few likely impacts. Certainly, the contract price of a new-build yacht will continue to rise in parallel with raw material and finished goods prices, as well as wage inflation.

“We will also likely see contractual provisions to allow price increases in line with inflation.”

As an expert within the industry, Laverty draws back on previous trends throughout recent history that he feels buyers must learn from.

“There was a similar feeding frenzy in the superyacht industry in 2005-6, where we saw the emergence of some of the very worst brokerage practices.

“Then, during the 2008-9 downturn, a lot of those contracts were cancelled and there’s still a lot of half-built hulls in existence today that owe their parentage to that time,” Laverty continued.

“With market activity levels high again, we are starting to see some of the same elements creep back into the industry now – the pop-up shipyard, the virtual builder and the unbelievably-priced project.

“Now, more than ever, it’s important that buyers are astute when making significant purchase decisions."

With this in mind, Hill Robinson’s overarching advice to clients is to perform due diligence on their shipyard of choice, with the help of legal experts and independent project managers.

Laverty emphasises the importance on refining ones requirements and specifications in order to minimise risk of being negatively impacted by increasing costs and delays.