STATE OF THE SALT – Pre-season 2015/16August 25, 2015
“Here we go again”
That phrase can apply to a lot of things in life; positive things, negative things, but it always implies that it’s something with which you are familiar. So when I open this edition of my State of the Salt Address with that phrase, you know it’s not going to contain a surprise and it does not. We’re far from out of the woods on winter chemical supply balance across the board. Pretty much everything is challenged to meet demand.
I’ll start with the star of the show, bulk rock salt.
BULK ROAD SALT
Last winter’s late arrival and unrelenting pounding into the population centers of the Central and Eastern US sucked up salt at record amounts in those markets. Not all markets were pounded with record snowfalls like Boston and New England, but pretty much everyone had a taste of winter’s wrath. So it should be no surprise that salt stockpiles were cleaned down to the floors in the suppliers, the municipalities, and the consumers. While we were trying to reload those stockpiles in the late spring months of April through June, nearly all of those tons went right out the door to “refill and top off” municipal contracts where prices were all but guaranteed to rise in the next rounds of bidding. Prices on bulk road salt are up in the shortest supply markets and only slightly up in markets where last year’s big price increases held.
It was late June before the salt industry started to build local stockpile inventories in earnest. The record warm winter in Europe coupled with a record solar salt harvest in China has put salt in a supply glut in the rest of the world therefore freeing up those tons to attack the US market. In addition, while ocean container freight rates have climbed in nearly obscene ways, bulk ocean rates are the lowest they’ve been in a decade which further enabled distant supplies to reach the US shores. Adding to this scenario is a very strong US dollar right now. As I write this, one US dollar is equal to $1.31 CDN, and 0.91 Euro where a year ago it was $1.06 CDN and $0.73 Euro.
The combinations of international currency exchange rates, low bulk ocean shipping rates, and warm winters in the rest of the world have combined in a perfect storm of TEMPORARY opportunity for foreign supplies. There are long-term reliable supply options and there are short term supply options. If you choose to play in this arena, make sure you know the difference because the companies you compete with today with your new source may well become your only option when currency and weather normalizes and these supplies dry up and can’t leave their own shores. That’s the big picture globally on supply. It’s straight forward, but many are lulled into a sense of false security by the thought of huge price differentials in the costs to buy and the current market to sell. My friend Malcolm Poole spent a lifetime in the salt business and he said to me a simple phrase that I’ve been careful to remember; “you want to collect the crumbs of opportunity the elephant drops but you must always be careful to not become toe jam on the elephant” Four companies dominate the US bulk salt supply. They are the elephants and newer suppliers may well find themselves under the foot of these elephants when things normalize.
I think normalizing is the key to all of this. What we are in right now is a temporary situation that is abnormal in weather, depleting supplies, and periods of intense demand. Salt is the most abundant commodity on earth, but its hard to store enough in any market to satisfy peak record demand times. Keep your relationship with the suppliers you’ve known for years even if it is a very reduced position. Burn that bridge now and when things flip the other way, you’ll look back with regret when you can’t get anything because currency and other conditions have taken the new supply players away.
Calcium chloride is sold in liquid and dry forms. Like salt, it has many uses from controlling dust in summer, to snow and ice in the winter, in brine systems for refrigeration and skating rinks, and more to my point in oil. Calcium chloride is used extensively in energy markets as a completion fluid in oil drilling and as part of a formula for hydrofracking in gas markets. Those markets are currently nearly idle due to low cost oil from OPEC. When oil production suddenly stopped in Alberta, Dakotas, and in the Permian Basin of Texas last winter, many tens of thousands of tons of calcium chloride were freed up for winter markets. And, that was global so there is plenty of calcium chloride available right now from all sources. This is not going to last. Any number of scenarios could and likely will occur such as the calcium chloride equivalent of a run-on-the-bank where sudden mega orders deplete supplies and cause shortages. That happened from about this time last year right through the winter. While we have new supplies from Russia, China, India, and Europe hitting the US shores right now, think about those currency exchange rates and price of a barrel of oil to know when it’s time to expect supply problems. OXY, the premier US manufacturer of calcium chloride is on open order right now; you can get all you want and following a totally empty pipeline from last winter, most people are not thinking about buying ice melters in the heat of summer but that is exactly what you should be doing. The first frost will change psyches and that’s when we usually see a run-on-the-bank for supply which in turn triggers order control and no product available. The early bird will get all the worms in calcium chloride in our view.
Magnesium chloride sold in liquid and dry forms. Like calcium chloride, magnesium chloride has many uses from dust control, to snow and ice control, completion fluids for oil drilling and in hydrofracking. Unlike calcium chloride, magnesium chloride continues to be in a severe shortage. The winter depleted all the stocks of magnesium chloride and two new market uses for this product are pulling significant quantities in a market that is severely oversold. Adding to this pain was a labor strike at Dead Sea Works who are the prime supplier of dry magnesium chloride pellets and flake to the US market. While that strike lasted 4 months, the timing couldn’t have been any worse for the US market that uses MAG products. It came at the peak of record winter demand and never recovered. Their plant is still not fully operational, and while some of their MAG product is beginning to dribble in, demand outstrips supply by a wide margin. It will be a very challenging year for Magnesium Chloride dry products, and, at the present time, liquids seem to be mostly unaffected for supply.
“Blended deicers” products are generally salt and something else. The something else component may be in quantities that are meaningful and, more often than not, amounts that are either insignificant or non-existent. With the premium product shortages of calcium chloride and magnesium chloride, the fortified blended products with meaningful amounts of premium deicer are going to be much less available in the market this year. I’ve always advocated demanding a full disclosure of ingredients from the supplier and manufacturer for anyone using any product. What is to hide? A legitimate blend that has at least 3%, and as high as 20% magnesium chloride or calcium chloride will provide true performance and will be a excellent back-up option while pure premium packaged ice melters are in tight supplies or unavailable.
This is not a secret science nor is it something that has any reason to not disclose; they are simple chloride ice melters! Many claims of added premium ingredients in blends are false, and the only way in which to know for sure is to demand a certified breakdown of ingredients by percent weight. Any supplier who refuses to provide such evidence of what you are buying is not only in violation of Federal and State right-to-know laws; it is just ethically wrong! Be careful to know what exactly you are buying in blended products considering these shortages and don’t get tricked into buying dyed rock salt for three times value. Demand the breakdown information and a certified analysis from your supplier and if they refuse, ask what do they have to hide?
We provide legitimate blends and blends may be the only option for many this coming winter. We immediately took action last March when Dead Sea Works magnesium chloride facility went on labor strike to secure sufficient tons of magnesium chloride in order to build our TruMelt® and ClearPath Winter Wizard® inventories over the summer to be ready to ship these premium blends for the coming winter. Many waited until summer to try to find premium ingredient supplies only to learn there are none. Caveat emptor.
I’ve always been of the opinion that you can take long range weather forecasting with a grain of salt, meaning I put little to no stock in weather forecasts that tell me we are going to have severe weather in six months. They have trouble telling us what will happen tomorrow accurately so how can predictions about six months from now have any true degree of reliability? That is my opinion and I’m sure others see it differently including the people who are paid to provide the information.
With that premise, then believe any of the following you like:
- 15 years until the start next mini-ice age: OK, this one I actually tend to lean more towards because they are basing that prediction on sun spots and those of you who read my newsletters know that I believe the sun is the largest single weather effect we have on earth’s weather.
- Another brutally winter is coming in 2015/2016– worse than last year. Yes, I certainly like the sound of this, but will throw darts with a blindfold and then average the two data points. Personally, after 42 years in the snow and ice chemical business, I can only remember one time when we had three heavy snow and cold winters in a row.
- Powerful super El Ninowill bury snow belt cities. Well the super el nino is setting up, but whether or not the jet stream cooperates with arctic air to let all that moisture land as snow remains to be seen.
June 1st OSHA GHS COMPLIANCE
This topic is well off the radar of most reading this article. It shouldn’t be. While it has relatively minor impact on bulk salt it could, repeat could, have an effect on packaged products. On June 1st, OSHA regulations changed for packaging of affected materials and for document management on all materials. For example, many are aware that “MSDS” is now a thing of the past as we have a new Global Harmonized System Safety Data Sheet – or called simply; “SDS”. OSHA’s new regulations are confusing and while some believe that consumer product packaging impacts 50 lb. and down packages and supersedes OSHA rules for GHS, the fact is absolute answers are hard to come by from anyone including OSHA. We’ve gotten different answers to this question each time we’ve asked it. On the SDS change, there is no question that new regulations’ compliance for business is in full force and effect so make sure you have updated all SDS for each product you have to the post June 1 GHS compliant safety data sheets. On labeling, the new regulations focus on hazard classes for each product; and most deicers are non-hazardous, so it is unlikely to have a big impact initially unless there is a precedent set that a bag of salt must contain all the safety pictograms, signal word, and hazard warnings for various potential exposure issues.
In summary, not a lot has changed in the winter chemical world since my early summer State of the Salt newsletter in that the supply across the board is snug – very snug. If we do get an early and/or hard winter, then supplies will not get caught up and we will be facing more of the same we had last year into the fall of 2016. Be careful to vet and evaluate properly low cost offers of salt from new companies. While some are likely fine and will be reliable, many are inexperienced and will have unexpected challenges with shipping, importation, and deliveries. While it looks great on paper that buying salt in [fill-in-the-blank] at $15/ton and selling it in the US at [fill-in-the-blank] for a windfall profit, the reality is that there are many regulatory hurdles to clear and many import and export challenges. Salt in the middle of an Egyptian desert with no infrastructure to transport to the sea looks great on price in the desert, but if you can’t move if from there what good is it? Lots of rip off schemes have surfaced with over-night brokers.