The Salt Story... 2018/19 Shortage?
As I sit here enjoying a beautiful 80 degree day in mid July, it’s ironic to be talking about salt. Actually, if you are in the “salt business”or are a snow contractor or property manager it’s late to be talking about salt. Here in Michigan and the midwest we are only 4 months away, or less some years, from our first snow and/or ice event. It should be important for us to know: who we are working for? Who is working for us? Do we have enough equipment? And where are we buying salt and how much will it cost this year?
In an effort to share, the following is the basic story of salt in the Midwest markets...
According to some research we can all find out there on a google search....there is about 10 million tons of salt that are sold into this region and its outskirts annually. There are about 4 main providers, one at about 1 million tons, one at about 3 million tons, and a couple others that make up another 6 or 7 million tons. There are a few other salt companies that don’t own mines (at least in the US or Canada) and they import salt from other countries, such as Egypt, Chile, United Kingdom, Morocco and others. This combination of providers work to win bids and win relationships to sell salt into all of our cities, towns and local markets.
Who gets to buy salt first?
Our government gets first dibs to put out requests for proposals to get quotes for the upcoming season. This process starts typically in May and can linger through the summer. Just like any company managing their inventory or capacity of sales......the salt companies are trying to win some government bids, to sell off some of their inventory / production capacity. Therefore the salt companies really don’t know how successful they have been at selling their inventory till most or all of the public bidding and bid acceptance process has taken place.
After this round of sales, there is some salt released to be sold direct from the top salt companies to contractors or to large resellers/brokers of salt. The pricing available to this round of buyers is higher than that of the pricing offered to our state and local governments.
Once this round is achieved, the smaller contractor, one without a place to buy and store a season’s worth of salt or at least a sizable portion or a seasons salt...well they must rely on the local supply yard to have salt for them a few tons at a time throughout each event, all season long. As you might imagine, each layer has a cost increase and a risk increase. The sooner we all find and secure a salt deal to meet our needs the better off we will be going into winter, negotiating contracts and sharing this process with the end users…our clients. I strongly urge you to “educate yourself and educate your clients” on the process of procuring salt. Knowledge is always powerful and helpful.
Okay, so now the the question, comment, worry, misunderstanding, drama, blame, etc. that we all really want to know? Why is there a “shortage” and how come some years my price is double other years?
Well, here is how this works, in simple and hopefully easy to understand steps....(please refer to the articles and links attached):
The market needs/uses on an average winter about 10 million tons.
There is plenty of salt in the world, however the “transportation costs” to get it from a mine to your client’s parking lot can vary greatly.
Our government gets first dibs.
This past season, the majority of all stockpiles/inventory was used or sold (for instance, the docks in Detroit are pretty much empty right now).
The two largest salt producers have either strike issues (not producing any salt) or challenges in their mining operations (producing less than average salt).
This leaves the market a speculated few to several million tons short of market demand.
Solution to filling the inventory gap.....import salt from other countries. The price for this can be double or more that of local salt due to transportation costs.
Now, the buying begins. If you look up the DOT bids that are occurring, you will see what I see. Many state and local governments are requesting more salt (10 to 20 percent more than last year) for their communities. This is the first step in using up the already “less than forecast market needs of 10 million ton). Remember, some are guessing that we are many millions short of the forecast 10 million tons.
Simultaneous to this government buying, many large commercial buyers (snow contractors across many states) are being informed that “they cannot have any salt this year”. Or “we might be able to sell you a portion of what you usually purchase, but we don’t know right now what we have or don’t have to sell you”. This creates a valid concern and worry for contractors, brokers, etc. and of course...How do any of us bid or sell work when we don’t know “if” we will have salt and “how much” it will cost. And of course, most contractors don’t know this upcoming seasons work load, as many properties haven’t thought of signing deals with contractors in July .
So, importing salt has begun and will continue. The prices will be much higher than the typical local pricing, the terms are usually much different (pay in advance for all or a decent portion of your needs) and for those of us that are spoiled to have “mostly white” colored salt, well it might be time to embrace salt of a different shade.
Do some research; become a knowledgeable buyer. Learn about ASTM standards. Know what you are buying. Learn about solar salt vs. mined salt. And when it comes to bagged products....please realize that most “blends” vary in ingredients by just a few percentage points one way or the other. Therefore price points for these products should not vary too greatly.
What to do next? There is an old and true statement. Reliability; quality; price ...You can have them all, but maybe not in the order you want them. And sometimes we only get the two we make most important. I have listed the three components of a good business relationship in the order I follow. This is something my team and I believe in when we are buying and when we are selling our products and services. We want to be in alignment with our vendors and our clients. This keeps everyone’s expectations on the same page. Based on your order of priority, I suggest you reach out and begin, or complete, if you have already started the process of locating salt for your winter needs and who you will work with. Loyalty is what we all desire from our clients and we should profess to the same buying model. However, we will all find people that we have purchased from in the past leaving us high and dry. Don’t take it personally, seek out new, different and hopefully better long term relationships.
Next….share as much as you can learn with your clients. After all, it is they who will ultimately pay the increased cost. Salt pricing violently going up and down is NOT something that we the contractor can control and therefore we should not be financially responsible. We should be responsible to share our knowledge with our clients. Break out the salt cost portion of the contracts and then year in and year out as the market fluctuates, well then so should the “salt cost” portion of our contracts.
How many times, for those of us in markets where “all-inclusive or seasonal” pricing has become popular, hear....“you win sometimes and the client wins sometimes”?? Seriously? In what other business is this a model? The business of “Snow Management” should not be one of “ya win some and ya lose some” or…“the less work I do or salt I use, the more money I make”....how is this good for the safety or the patrons? Our families? Our loved ones that visit the local malls, banks, churches, etc....What can we all do? Break out the salt pricing, educate ourselves and our clients, become ISO SN9001 professional snow companies.
In closing, life is really simple, however we seem to make it difficult. See, we are either part of the problem or part of the solution? We are either learning, growing, searching out information about the industry we all feed our families with and work long and hard hours to be great at! Or we are still talking about “ the way it used to be”. Keep seeking information, learn all you can, help others around you learn, help your clients understand this information.
Is there a solution?
Well, my opinion is that there are a couple things that would “minimize” the volatility and uncertainty of the salt market. Here they are, in no specific order or responsibility:
Work to get long-term snow contracts with our clients and have salt be “broken out” as a market driven portion of the pricing.
Acquire a facility to safely store as close to a season’s worth of salt as possible.
Purchase salt in the Spring or Summer for the following season.
Have our government buyers be held accountable to purchasing a “consistent volume of salt”. A quantity that is a formula of the amount of inches of snow they had the previous ten years averaged and then “ a cushion “ for a heavy winter. Trust me....forecasting salt usage based on square feet maintained and number of inches in your market is very much a formula that is predictable. This reduces greatly “running out or hoarding” of salt.
Become a member of ASCA and learn all you can about the risks we all take in this industry and how to best serve our clients.
Find and keep vendors you can trust....find and keep clients you can trust....find and keep team members you can trust….and release all others to the market! Relationships should be that of a “ partnership “. Life is short, there is absolutely no reason to work with people you can’t trust and have a mutual respect for one another. Life is tough....and so are you!
Troy Ryan Clogg ASCA-C LIC-M CSP