Where’s The Salt?

Regional supply and price challenges grow in road salt supply for the preseason 2018-19.

While there is plenty of salt on this blue marble in space that we all live on, road salt availability in certain regions is showing early signs of supply and price problems as we enter the preseason this fall.

Coastal markets are generally well supplied from multiple sources globally. However, some interior regions of the US are already seeing signs of availability problems. Along with availability troubles come price increases so expect both in the affected regions. Much of this is the result of a significant uptick in transportation costs along with a series of events with domestic mines that triggered some delays and problems.

The relatively good news in supply will be the coastal snow belt of the Northeast United States. This region from North Carolina to the Canadian border has been a very competitive market for decades due to proximity to deep water ports where salt from as far away as Australia can arrive competitively against salt mined in North America. I’ve mentioned in previous State of the Salt addresses how ocean freight costs had plunged in recent years resulting from changes in ocean shipping and vessel size. Well, those days are now winding down and a new set of sea going vessel conditions are impacting road salt supplies.

Moving any bulk commodity product like road salt, require bulk containers whether they are dump trucks, rail cars or ships. Since one ship can haul enough salt to supply a small city for the entire winter and their costs are a fraction of rail and truck, water transportation is the main way in which salt tends to arrive where waterborne delivery is possible. Understanding some of these transportation nuances are important for all buyers of road salt as the salt itself does not see big swings in mining and harvesting costs, the delivery vehicle whether a rail car, dump truck or bulk ocean vessel, are seeing relatively big increases in costs. In my previous article, I wrote about the truck driver shortage in the U.S. Add ocean vessels to the mix now.

The largest dry bulk vessels are Cape Class vessels capable of carrying 150,000 DWT (dead weight tons) up to 450,000 DWT. Rates on dry bulk Cape Class ships are up nearly 100 percent over a year ago. Panamax vessels, the largest vessels that can transit the Panama Canal, average about 65,000 DWT and are seeing mostly flat rates, but the vessel availability is not great and particularly for salt movements. Supramax vessels can haul 50,000 tons are a common workhorse for salt and capable to transit the oceans and into deep water ports, but they cannot enter the Great Lakes or river system due to their deep draft. Surpramax vessels are available, but predominately only from Europe on a “European backhaul” basis. These facts are a key element to the next part of this report and explaining where trouble is starting to show up.

Rough times ahead

There are salt supply problems in the upper Midwest stemming from a series of events that combined into early trouble. Typically, the river system is busy in season (August to October) with moving grains from the grain belt down the Mississippi river by barges to NOLA (New Orleans) for shipment to overseas customers. That market right now is very robust, and the barge operators do not want to sit waiting for a salt ship to arrive to then transload into those same barges for a “backhaul” up the river to various ports. There is more revenue to be gleaned by turning right around and reloading grain because salt is always trying to move on the cheap. Why is this a problem? It’s a problem because those grain barges are going back up the river empty to catch the next downstream run without interruption because the prices and demand for grain is strong and road salt suppliers are unable to pay up $25 per ton more to go from New Orleans up to the grain belt. Therefore, even if a ship of salt does arrive in NOLA to then transload to barge service for river delivery, getting covered barges to haul that salt committed and booked is nearly impossible. Now they need to wait until grain season is over and hope to catch up-river barges provided an early freeze does not lock out the river and lake system for traffic.

We’ve been seeing early signs of trouble in the upper Midwest salt markets since July and that is deepening quickly. Most buyers have not realized just how serious supply is right now and by the time they do, it will likely be too late to do much about it. It is not out of the realm of possibility that the Midwest’s only option for salt may be from the coast by truck or rail if it snows and demand for what small amounts are currently available get quickly bought up. Add to that at least two prominent North American mines with flooding problems curbing production rates coupled with a three-month labor strike at the largest salt mine in the world in Goderich, Ontario, and you have a system that is behind, can’t catch up and has serious delivery problems as a result of the foregoing vessel market.

Any Hope?

This does not mean that there is no hope, but what it means from my side of the desk is that if we want to move salt into the upper Midwest, our only option is to use seagoing vessels to move it into the St. Lawrence and Quebec, then unload onto dry land and book “Lakers” (lake service low draft barges/vessels) and then reload to ship on to the delivery point. All of that comes at a significant price increase due to multiple points of handling and travel. Each of these ports is often ILA controlled (International Longshoreman’s Association), where six-figure salaries are routine. Add to that the number of required union longshoremen to discharge or load a vessel and you can see how these costs quickly skyrocket. Options are narrow for getting salt to most places without involving a ship and longshoremen.

The Cost

We believe that salt prices will continue to firm up and then begin rising as we move through the preseason window leading up to Nov. 1, which is the start of in-season prices for most suppliers. If it snows frequently in the upper Midwest markets, it will quickly deplete the inventories and then panic buying will quickly drive up prices and cut availability to nearly zero for private markets and make municipal markets very tight.

Path Forward

If you have not purchased and/or committed to the road salt that you expect you will need for this winter yet, you have very little time left to do that if any time at all. The early bird will get the only salt out there and then it will be a fight for tons anywhere you can get them. We do not expect to see any improvement in supply or prices on salt in the regions indicated at this time unless flooding in the affected mines is managed and stops, and the river and lakes do not freeze this year. If we have early and hard cold in the snow belt, all bets are off for supply of road salt. If on the other hand, it doesn’t snow, then none of this will much matter. Roll the salt dice accordingly.

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