State of the Salt – Summer 2010May 19, 2010
It has been a year since I last published a State of the Salt Address, however, changes in the market, changes in global supply positions, and the weather are all factors I’d like to talk about in this installment of my market newsletter. As always, this newsletter is filled with hyperlinks of my reference sources so you can read the same tea leaves that I am reading and draw your own conclusions.
Overall, in my view, right now it is a buyer’s market for deicing materials. However, that market is very fragile and it won’t take much to tip the scales the other way, so we are advocating that the early buyer will get the lowest costs.
The salt of the earth salt business is changing and shrinking a little as far as major producers are concerned. Many people were aware of the 2006 acquisition of International Salt by K+S of Germany three years ago, but some may not be aware that K+S continued to expand their interests in salt last fall when they successfully closed on the acquisition of Morton Salt Company headquartered in Chicago. Morton’s business rounds out K+S’ global position nicely to now have them comfortably in the lead as the largest salt company on the planet. The Securities and Exchange Commission made a number of demands of K+S at the closing to avoid what they perceived as market conflicts by forcing K+S to divest certain positions in certain ports where the SEC perceived potential limit of competition. In my view, the SEC created a windfall for Eastern Salt and Granite State Minerals both of whom were the beneficiaries of the deal, but I suppose in the grand scale of nearly $3 billion in sales for Morton, being forced to give up a chunk of their hard earned business to their competitors is not significant. Salt is clearly a core and vital business unit for K+S as they are now considering unloading COMPO, a peripheral business unit in their fertilizers business.
Things to watch this fall and winter will be the demand in Canada where a good chunk of Morton’s market share is located. Last winter, Eastern Canada had one of the lowest snowfall winters on record and snowy places like Toronto, Montreal, and Ottawa didn’t see much snow at all. That left huge stockpiles on the pier which is now backing up stocks in the mines and along the distribution channels. In fact, the only market that caught a bit of a pop on salt demand last winter was the Mid-Atlantic who were crushed under record snows and subsequent demand for salt.
Don’t forget that salt is the most basic commodity chemical in the world, and more than half of the selling prices on salt typically are transportation and handling. So, the excess tons lying on the docks in Canada could not be economically shipped to Baltimore and Philadelphia to backfill mid-Atlantic peak demand. That product sits where it first landed awaiting snow in Canada and that will likely significantly impact the delivery of salt by sea in those locations. Salt is treated with “YPS” as an anti-caking agent but that additive makes it unsuitable for non-bulk markets such as bagged salt and blends, but some companies are starting to bag and blend road salt; so, caveat emptor.
Primary salt producers also appear to be making a strategic move to cut off or limit sales of dried medium salt for bagging. Bagged salt is typically a carefully dried and screened premium product. Our medium salt tons are already fully committed for this coming 2010/2011 winter season, and we are unable to get more from our traditional suppliers. We’re evaluating new sources of medium solar salt which we believe will help to fill this gap; however, the jury is still out for us.
Consumers and end users are cautioned for this season to be very careful to look at samples of any bagged salt that they plan on buying. Many companies are already bagging up highway salt and road salt which is not dried, not tightly screened, and contains high levels of fines. For more information and photos of salt products and how they vary, please visit our salt page on our website. We see a lot junky salt out there and many baggers are simply throwing $50/ton road salt in a bag. In some cases, they can get away with it; but, in most the moisture content is too high and this product will turn into a fifty pound paper weight, so make sure you know what you are buying!
Further, driving the bulk salt market this year is dramatic and significant increases in ocean freight. Additional pressures on imported salt from a falling EURO will further pinch the salt market and likely result in higher pricing in the US as domestic producers carefully match their pricing on salt. Don’t forget that imported salt has been a very significant factor in the US market as far as pricing goes, and imported salt accounts for a significant portion of the US market today. Many people are unaware of Canadian, Chilean, and European salt imports and how they impact pricing. Also don’t forget that deicing salt sales account for only about 45% of the total US market, so while deicing salt is about half of the business, it’s not all of it by any means and other markets are also affected by these trends indirectly.
The reality of increased ocean freight costs coupled with falling currencies in key countries that produce or trade in salt have the potential to drive up prices quite a bit even though supplies are long. That’s counter cyclical to our normal expectations of long supplies in commodities causing prices to collapse. As many stockbrokers told clients about a year ago when talking about prices, “you can’t fall out of a basement window” ; so, in this context, salt prices tend to run at or near the bottom of the price curve potential because of their commodity nature. Recognizing this factor will help many avoid being blind-sided by a sudden jump when other factors such as demand would have you expecting a reduction.
Before you completely glaze over on salt, be careful of what you buy and when you buy it this year as these market factors will surely affect the price and quality of salt at the end user.
Liquids are all the buzz. Everybody wants them, and there is more misinformation about liquids than there is information. Grandiose claims by boutique additive manufacturers are proliferating in our market and serve only to further confuse consumers and end users. With regards to our experience in the humid East of the US, while some liquid salt products are beneficial and work well, you can’t replace a dry chemical deicer program with the same material in liquid form because there’s just too much water in the liquid. Most liquid deicers peak out at 30% chloride when you consider that dry material turns into liquid when mixed with snow. So, when uninformed or misinformed liquid users start putting 70% water on ice and wondering why it’s not melting, tell them you have a hunch as to why.
This is not at all to say or suggest that liquids are not good; they are great! However, they are another tool in the snowfighters’ arsenal and not a replacement for dry products outright in our experience. Liquid use for anti-icing (application before the storm) and for pre-wetting (coating salt) continues to be the primary ways in which liquids are most effectively used in winter deicing operations.
We stock and offer virtually all forms of liquid deicers in bulk and some flavors are available in packages. Liquid calcium chloride, liquid magnesium chloride, liquid salt or salt brine, and potassium acetate are all stock items and generally readily available from one of our distribution centers.
The robust mid-Atlantic winter will drive premium and packaged deicer demand in that region. Long inventories from a soft winter everywhere else will likely result in a catfight of price discounting in the early season, find the bottom quickly and then climb from there as the winter approaches and higher cost replacement inventories arrive.
Dry Calcium Chloride:
Dry calcium chloride is in a very interesting state right now. We have the successful completion of the sale of the calcium chloride business by Dow to Occidental Chemical putting OXY in the calcium chloride business for the first time. With soft winter demand in most of the US and Canada, we suspect that inventories at OXY are still very good and pricing did not go up this season, which is another indication that things are pretty competitive right now.
The big question in everyone’s mind in Calcium Chloride right now is whether or not Tetra will get their plant up and running in Magnolia, AR on flake and pellet production. Right behind that is the apparently stalled project in Trinidad with the former General Chemical production facility that was moved there from Manistee, MI to provide dry manufacturing for a new start up following General’s closure in 2002. Information on this privately funded venture is hard to come by, but rumors abound that the plant and equipment are sitting on the ground in Trinidad and not moving from the first point of rest when delivered over two years ago. The last press release from the Company was last spring, so I wouldn’t expect to see anything coming from here too soon either.
Ocean shipping rates spiked up and currencies down, as we mentioned in the salt section, will keep China in a tight spot for supply of calcium chloride into the US market. Since many wholesalers, like us, were left with far more supplies than we expected at the end of the winter (January), we are already seeing and offering some sweetheart deals on our leftover inventory to move it out so we can replace all of it with domestically manufactured and supplied calcium chloride. The early buy on calcium chloride is going to be a buyer’s market from what we see at this point with inventories moving out to clear the way for new material to arrive or replace them.
Dry Magnesium Chloride:
Dry magnesium chloride, MAG Pellets and MAG Flakes, are also somewhat long on inventory at this point. MAG is typically not held in large stockpiles; and, being a good product with strong environmental preference driven demand, it will run out quickly if demand picks up quickly. Pricing on MAG is unchanged from last season but Dead Sea is careful to hedge their bet this year with the conspicuous absence of any pricing indication “in-season”. A small increase to cover ocean freight is being absorbed in pre-season, and will become effective in the fall, so this too means buy early for the best deal unless you like to gamble. As a result of the soft winter overall, our pre-season prices on MAG for this August are actually LOWER than they were last August even inclusive of increases, so we are looking to make some aggressive pricing deals for anyone who wants to buy early and save.
Magnesium chloride from Europe and China has been around for the past couple of years, but these are not comparable quality in both the flake and pellet form, and we have seen quite a bit of push-back from customers who tried the other brands and quickly returned to MAG because of particle size problems plugging spreaders with these other “me too” brands. Again, don’t expect MAG to be there once the snow flies. It always is the first to run out and then is slow to recover; so, if you want the Dead Sea dry magnesium chloride, best to order early.
Domestic magnesium chloride is only manufactured in Utah and freight and logistics are tough – particularly with diesel fuel on the rise. The form is granular and that too is often not liked once the end users get to use the Dead Sea MAG pellets and flakes. Dead Sea’s MAG is really a good product and there’s just no denying it.
Check our new website (should be launched by August 15) for detailed information and comparisons on all the premium deicers.
Ah, blends. Blends are largely dyed salt with a pinch of something good that is not in sufficient quantities to actually provide much benefit or boost to the salt but allows the marketer to make catchy claims and statements celebrating the micro-components as if they were all that was in the bag. We continue to advocate truth-in-labeling on deicer products and encourage customers to DEMAND a chemical analysis of what is being offered. I’ve said it a thousand times; however, it bears repeating: this is not rocket science and there are no secret formulas in deicers. There are tight laws regarding the labeling of salt products; and while these laws are written with food ingredients in mind, they still apply to the bag of salt that the consumer buys, and it is time for the US Government to force truth in labeling in deicers. There is just way too much smoke and mirrors in the marketplace and it only serves to confuse and bewilder the consumer.
Blends have enjoyed enormous growth in the packaged deicer market over the past two decades, but things have virtually exploded in the past five years with exponential growth in deicing salt blend. Why? It’s simple. From the producer side, blends are nearly always predominately salt, so costs are low compared to premium deicers and performance deicers. From the consumer side, the labeling is king and the deception in labeling on packaged blended deicers today is on a par with selling liver pills from a covered wagon in the days of the wild west. It is absolutely horrendous with very few companies disclosing that they are selling salt.
We purchased some popular blends in the marketplace and had the contents tested by an EPA laboratory; the results were not surprising. These blends claimed to be “CMA” and the label on the back of the bag extols the virtues of CMA. In one case they said it was “CMA based” and in the other they claimed it was “CMA coated”. Well, with a million bucks worth of gas chromatographs and some of the most sophisticated laboratory test equipment available in science, none of the samples we submitted had detectable levels of CMA in them. Not one! Of course, they were in a very fancy bag with lots of nice pictures of trees, puppies, and children playing, but in each sample tested the lab report came back with salt levels exceeding 95%!
We happen to handle CMA, calcium magnesium acetate, from Cryotech, and we happen to also have the benefit of some of the real data on CMA and salt. The minimum amount of CMA necessary to provide some corrosion protection in salt is 20%, and really 40% is more accepted as the base level for corrosion benefits. But what about less than 1%? The analogy that we use is: if we added one shot glass of gasoline to 20 gallons of water, could we then drive our car on that mix? Of course not! And therein is the benefit you are actually getting versus what people think they are getting. In a dramatic change from the past, we are pleased to announce that Cargill has decided to join us in the outcry for truth in labeling on deicers! Bob O’Connell, Marketing Manager for Cargill’s packaged deicers is revamping its packaging and material data sheets to reflect in detail exactly what’s in the bag.
That is really some very big news as Cargill is the first producer to step up and join us in the fight to disclose what your buying and clean up the horrendous labeling lies that exist in this marketplace.
We offer a blend and it is an encapsulated salt. Our pricing is under five dollars a bag; it is treated with an EPA certified product and we give a certification of ingredients on the product. That is the only blend we sell and we stand behind it. We gladly provide a complete chemical breakdown, by percentage of what is in the product.
If you use a blend, ask the company for a certified analysis of what they are selling to you and watch them stare at their shoelaces and shrug. We must demand and force truth in labeling on blends and all deicers if we are going to legitimize this marketplace and stop the liver pill marketers from ruining the environment by lying.
Finally, with regard to blends, one of the reasons that the major salt producers are limiting the sale of premium medium solar and dried salt to blenders and packaging companies is because they see the enormous profits being gleaned by these dyed salt “blends”, and they are making a legitimate blend with full disclosure and not getting a fair share of the market. Every company in business is in business to make money and if you make 10% selling salt to someone who then re-labels it and marks it up 1400%, you have to ask yourself why are you selling them the salt to start with if the value of it is that high? There ya go. Do the math.
OK, I’ll slide the soapbox back under the counter on that topic for now.
The weather is always the key to the deicing salt business. Without snow and ice, there is no demand. Just take a look at the 2009/2010 winter and the resulting excess inventories stacked up around North America to see how weather is always the key. Because there is a fair amount of product stockpiled around the snow belt should not be construed or believed to mean that supplies are long and prices will drop. The right weather sequence early in the winter can easily empty the entire on-ground inventory and have the industry chasing behind demand.
I’ve been at this for over three decades and in that time I’ve observed that a couple of factors can spell a boon for the supply side and trouble for the demand side of this business. A lot of the entire winter’s demand will be determined by the number of storms between Thanksgiving and Christmas. For example, the heavy salt and deicer consuming markets are, for the most part, in the population centers where people need to move about during inclement weather. The Richmond, VA to Portland, ME Northeast corridor is a key area for us, as that is our primary marketing area and our back yard. Last year with the mid-Atlantic storms, we had our strongest year ever; however, by January the snows in the New England and NY area were non-existent and stayed that way.
Weather is the key and to that end, I’m a student of paleoclimatology. I don’t subscribe to the man-made greenhouse gas global warming belief at all. I think it’s voodoo science. That statement should draw a number incendiary emails!
Do I believe in Global Warming? Sure I do. No question about it. If we didn’t have global warming then the entire northern US and all of Canada would still be buried under hundreds of feet of glacial ice. My belief is that we are in an inter-glacial period and this is all part of the norm. Has man had an effect on the weather? Absolutely he has by covering much of this planet with people and developing and/or removing many natural features such as Amazonian rain forests. However, I don’t buy into the man-made greenhouse gas theories at all. I think they are total poppycock.
On February 11th of this year, NASA launched the Solar Dynamics Observatory aboard an Atlas V rocket. This will provide scientists with unprecedented information about the sun, and I believe that within a decade or less will ultimately lead to revolutionary Earth weather forecasting. Right now, the focus for SDO is largely space weather; but as we learned in high school physics, for every action there is an opposite and equal reaction, and to that end I believe SDO will become a significant player in understanding and predicting Earth’s weather.
With regard to winter weather, I watch for some hopeful signs in solar cycles where the sun’s surface and sunspot activity is minimal. If you were to overlay the sunspot activity of the past 200 years with recorded snowfall, you can absolutely see a clear pattern that supports this. Right now the sun is in a very dormant state, and we are approaching the apex of that period. I am of the belief that the opportunity for a robust or normal winter is in place, and whether or not that actually occurs is yet to be seen. When sunspot activity is strong, typically snowfalls are low.
Solar cycles and astronomical cycles are the best indicators of what the weather should be and what we can expect in my experience. El Niño this, La Niña that, Sea Ice density this, and so it goes on and on with theoretical and some paleoclimatology predictions. For me, it’s where is the sun in its cycle and then wait for the balance of factors to line up. How can anyone sell that global warming set records for snowfall in the mid-Atlantic and record snows in England and Europe with a straight face? Warming up causes cold and snow?
For the Northeast Corridor of the US, we need the right jet-stream setup whereby the Jet dips deeply into the South Central US and then captures warm moist air from the Gulf of Mexico and drags it northward, the classic “Nor’easter” storm. These storms can produce some real sustained snowfalls if the cold will dig in and stay in place. If not, then they drag too much warm Gulf air with them and it will come as snow initially followed by rain which usually doesn’t help
So it all hinges on whether weather weathers or not.
MeltSnow.com will have a whole new look and an interactive online forum called “Ask Salty” on our new website which is set to launch shortly. We will announce the new site in a press release; however, if you have referred to our existing site and found it helpful, then you’ll really like our new website. It will contain lots of technical information on products, online Material Safety Data Sheets, Technical Data Sheets, and application information for every product we offer which is nearly everything used for chemical melting of snow and ice. We also have instructional videos on topics such as anti-Icing with liquids along with many other useful hints and tips that we’ve garnered over three decades of focus on snow, ice, and dust management.
I hope to see you at the SIMA Show in Providence RI in June!
This is a new feature I’ve decided to add to my newsletters. I will try to dig up some obscure use for ice melting products with each newsletter that readers might find interesting.
Magnesium Chloride: Did you know that MAG is used as a coagulant in Nigari process of making Tofu?
Calcium Chloride: Did you know that soaking freshly picked apples in a solution of calcium chloride will prevent cork spotting and bitter pitting?
Salt: Did you know that salt is used in decorative concrete? It is embedded in the surface of wet concrete, and then it is dissolved with water after the concrete hardens to leave irregular impressions.
Thanks for your time and I hope this newsletter has provided you with some information, some ideas, and helped you plan for winter a little better. I can be reached at 508-520-3900 and welcome comments and suggestions.
Chemical Solutions, Inc.