As we approach the 2019-2020 Winter, many thoughts should begin to turn toward raw material supplies of winter deicers. This is a good time to try to understand some of the dynamic forces that can affect supply and pricing of commodity products like road salt.

In over 40 years of winter product supply experience, I’ve not seen such wide variations in road salt pricing across the US as I am seeing right now.

One region is seeing prices fall while others are seeing prices rise and that is fairly unusual – and particularly so in the pre-season. When winter sets in and the demand switch for road salt is turned to the on position, it’s not surprising to see regions that are hardest hit begin to experience some pain in the supply and increase in price. The very definition of a commodity is that pricing is pretty even generally and moreover driven by supply and demand.

This year is very different with more fluid dynamics in play than a hydraulic system. I said fluid dynamics because largely, water is the force behind the lower prices as well as the higher prices in road salt this year.

In previous State of the Industry addresses, I wrote about the problems stemming from unrelenting rains and flooding in the US which have pushed rivers over their banks and caused silt to move into waterways and block them.

That has not improved.

In fact, it is worsening.

The Good News

Good news first. For those along the East Coast, competition has continually increased with international sources of supply in road salt, which can go by many other names: rock salt, bulk ice control, and “salt.” As these new international sources have gained footholds in the US market, they are continually making improvements in ocean shipping, facilities, and ports. Many ports around the world have worked to upgrade channel depths to accommodate larger vessels with deeper drafts and larger cargo loads. In some cases, new ports and sources have been constructed and developed and we expect that will continue to apply downward price pressure along the East Coast. New sources in the Middle East and North Africa have been working to participate in the US market for over a decade with improving success. Many new sources have good quality road salt that will meet ASTM specifications for granulation and moisture. Establishing a position and supply of road salt is not as easy as one may think. Many have been the unfortunate victims of rip-offs by entering the world of importation and international shipping without the benefit of an expert “trail guide” only to encounter financial and quality problems with what they get… if anything. On the surface, that $16-per-ton offer from an email FOB in a Middle East or North African country may seem to be a great deal, but without understanding all the pieces of the puzzle needed to reach your location, you are doomed before you start.

More to the point, Egypt has been finding more and more channels into the US market. In the process they get better at understanding what the market needs in terms of quality and moisture. The Siwa Oasis region in the western desert of Egypt holds vast salt reserves – some good quality and some not-so-good. Having vast reserves and having the ability to mine, screen, and deliver it to a waiting vessel at a port are very different things. As the infrastructure to prepare salt for the US market has continually improved, these new sources have opened up a new port for export in Matruh which will shorten the distance from the mine region to the ship by over 50 percent. Typically, the port of Alexandria Egypt, which is 700 km away from Siwa, has been the only port of embarkation option for these sources, but now Matruh is just 300 Km north and that cuts the inland freight costs considerably. Brazil, South American, Mexican, and, Caribbean sources participate and many of these are new sources to the US market. With the East Coast US proximity and wide availability of deep-water ports up through the snow-belt, this will continue to confound the market with supply and competition. If you’re on the East coast and need salt, you should be able to get all you need provided you have properly qualified your source and quality. That’s the good news.

And Now The Bad News

If you are in Heartland America in the snow belt, then you may be facing trouble on many fronts. First, the weather has all but wreaked havoc on the river systems with storm water volume. Remember that at the onset of this report I mentioned that water is key for both benefits and problems; it depends on where you are located. Because salt is one of the most inexpensive commodities on the planet, mining and transportation are generally 80 percent or more of the cost by the time it reaches end users. With regard to the central US, it is the largest expense in getting salt to market. There is not sufficient domestic North American production of road salt to supply the central US market. That market must have imported salt and that imported salt relies heavily on the waterways to move product to strategic piles. Along the Great Lakes, salt must move by barge or shallow draft “Laker” bulk carriers because most bulk ocean vessels cannot enter the lakes due to their draft depth requirements. This means salt moving by sea into the lakes requires either a shallow draft vessel or a stop at an intermediate location to then trans-load onto shallow draft vessels capable of moving across the lakes. The double handling and extra hands in the salt drive the costs up.

Domestic producers are very much aware of competitive pressures and, generally speaking, will match pricing to the lowest competitive offer. For example, a North American producer who is selling salt in the Baltimore market for $50 per ton may sell that same salt in the Midwest for a lot more since Baltimore is an active port and imported salt pressures down the price. But if the closest competitor in price is $90 per ton in Milwaukee, rest assured that the domestic producer will adjust accordingly.

Further stinging the salt market in the mid-west this year is the on-going high water in the Mississippi and adjacent waterway systems with some impassible. These rivers are vital transportation corridors for bulk commodities, and the high water has prevented barges and vessels from getting up and down the river. The back-up of bulk barges in NOLA (New Orleans) is significant. With the delays to get up river building up the back-logs, the barge rates have all but skyrocketed by as much as 250 percent with availability nearly nil. Again, those increased costs have to come from the market where they are sold. Moving inexpensive bulk commodities from point to point is always a game of transportation efficiency; and when that efficiency is impeded, the domino effect of price recovery takes off.

Salt Summary

I think the East is fine and will get whatever they need absent another February 2015 weather pattern in which it was nearly impossible to keep up with demand driven by storms every 3 days for six plus weeks. The central US is a house of cards. They cannot get salt up the river and there is not sufficient domestic supply to cover demand if winter comes in. That is the big “if.” We cannot predict weather and there are a couple of scenarios by which things in the mid-west could get in trouble. If it were to snow early and hard, that will quickly deplete on-the-ground supplies with limited reloading. If snow arrives late and hard, the same situation will drive panic. If it doesn’t snow or is a mild winter, then all will be fine. Plan accordingly.

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