Top Story: Material price increases expected to continue

MAPLE GROVE, Minn. – For those who hoped material price increases would come to an end in 2004, there is bad news. Both AOC and Reichhold have announced resin price increases that will take effect in March. And neither company sees an end in sight.

“Key unsaturated polyester raw materials continue to increase following the rapid and dramatic changed we saw in 2004,” said Bill Schramm, North American business director for Reichhold’s composites business.

Not only has the shutdown of a supplier caused a shortage of maleic anhydride, benzene prices continue to escalate, which drives up the price of styrene, he explained. The high costs of natural gas also are driving producer’s manufacturing costs up.

In response, Reichhold is putting in place a price increase of $0.04 per pound of unsaturated polyester resins sold in the U.S. and Canada as of March 21.

AOC is also raising prices by $0.04 per pound of resin and gel coat products, effective for orders shipping on or after March 15.

Boat builders’ profits to suffer?

In 2004, some boat builders’ profits took a hit as a result of the increases. Marine Products Corp., which manufactures Chaparral and Robalo brand boats, said in its fourth quarter and year-end earnings report that while its profits went up, its gross profits as a percentage of sales were down, due in part to the high price of boat building materials.

The answer, according to Kent Wooldridge, is to pass on the cost to dealers and ultimately consumers.

Both Wooldridge, president of the United Marine Manufacturers Association, and Doug Graff, vice president and general manager for the Composite Resins division of Resolution Specialty Materials, predicted in October at the UMMA/UMSA Partnership Conference that material prices would remain high in 2005.

Graff acknowledged during a speech at the event that consumers probably had yet to feel the impact of material price increases. And that when they do, it may effect demand.

Whether that’s true remains to be seen. Boat and engine prices have continued to rise in 2005 for a variety of reasons, and yet the industry remains optimistic about the coming season. Brunswick, for example, expects the industry may see 5 to 6 percent growth at retail.

Yet National Marine Manufacturers Association President Thom Dammrich recently said that “coping with rising cost of inputs to boat manufacturing and accessories manufacturing while still keeping boating affordable” is one of the industry’s three main challenges this year.

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— Liz Walz