SUMMER & SALT
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 the early buyer will get the lowest costs.
The salt business is changing and shrinking a little as far as major producers are concerned. Many people were aware of the 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 Co., headquartered in Chicago. Morton’s business rounds out K+S’ global position nicely and now has 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. That left stockpiles on the pier that are now backing up the distribution channels. In fact, the only market that caught a bit of a pop on salt demand was the Mid-Atlantic, which was crushed under record snows. 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 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 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.
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 and not tightly screened. We see a lot of 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 will turn into a 50-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 pinch the salt market and likely result in higher pricing in the U.S. as domestic producers carefully match their pricing on salt. Don’t forget that imported salt has been a very significant factor in the U.S. market as far as pricing goes, and imported salt accounts for a significant portion of the U.S. market today.
Increased ocean freight costs coupled with falling currencies in 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. 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.
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 contractors. 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 percent chloride when you consider that dry material turns into liquid when mixed with snow. So, when uninformed or misinformed liquid users start putting 70 percent 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 snow fighter’s arsenal and not a replacement for dry products outright. Liquid use for anti-icing (application before the storm) and for pre-wetting (coating salt) continues to be the primary ways liquids are most effectively used in winter deicing operations.
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 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 North America, 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 is whether or not Tetra will get their plant up and running in Magnolia, Ark., 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, Mich., to provide dry manufacturing for a new start up following General’s 2002 closure. Information on this privately funded venture is hard to come by, but talk is that the plant and equipment are sitting on the ground in Trinidad and not moved. The last press release from the company was last spring, so don’t expect to see anything coming from here too soon.
Ocean shipping rates spiked up and currencies down, as previously mentioned, will keep China in a tight spot for supply of calcium chloride into the U.S. market. Since many wholesalers were left with far more supplies than expected at the end of the winter (January), we are seeing some sweetheart deals on leftover inventory to move it out and replace it with domestically manufactured and supplied calcium chloride. Early on it is going to be a buyer’s market.
Dry magnesium chloride, mag pellets and 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 the Dead Sea is careful to hedge its bet this year with the conspicuous absence of any pricing indication “in-season”. A small increase to cover ocean freight is being absorbed in preseason, and will become effective in the fall, so this means buy early for the best deals.
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 domestic products because of particle size problems plugging spreaders with other “me-too” brands.
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 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.
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: 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 bagged salt. It is time for the U.S. government to force truth in labeling in deicers. There is way too much smoke and mirrors in the marketplace and it only serves to bewilder contractors.
Blends have enjoyed enormous growth in the packaged-deicer market over the past two decades, but things have exploded in the past five years with exponential growth in deicing salt blends. Why? It’s simple. From the producer side, blends are nearly always predominantly 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 Wild West. It is absolutely horrendous with very few companies disclosing that they are selling salt.
We purchased some popular blends and had the contents tested by an EPA laboratory. The results were not surprising. These blends claimed to be calcium magnesium acetate (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, none of the samples we submitted had detectable levels of CMA. Not one. Of course, they were in a fancy bag with lots of nice pictures of trees, puppies and children, but in each sample tested the lab report came back with salt levels exceeding 95 percent.
We happen to 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 percent, and really 40 percent is more accepted as the base level for corrosion benefits. But what about less than 1 percent? Use this analogy: if you added one shot glass of gasoline to 20 gallons of water, could you drive your car on that mix?
In a dramatic change from the past, we are pleased to announce that Cargill has joined in the outcry for truth in deicer labeling. Cargill is revamping its packaging and material data sheets to reflect in detail exactly what’s in the bag. If you use a blend, ask the company for a certified analysis of what they are selling and watch them stare at their shoelaces. Force the truth in labeling on all deicers if we are going to legitimize this marketplace and stop the liver-pill marketers from lying.
Finally, one of the reasons 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.
The weather is always the key to the deicing business. Without snow and ice, there is no demand.
Just look at winter 2009-10 and the resulting excess inventories stacked up around North America. Because there is a fair amount of product stockpiled around the snow belt should not be construed to mean that supplies are long and prices will drop. The right weather sequence early in the winter can empty the entire on-ground inventory and have the industry chasing behind demand.
Regarding winter weather, I watch for some hopeful signs in solar cycles where the sun’s surface and 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 Nino this, La Nina 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 U.S., we need the right jet-stream setup whereby the Jet dips deeply into the south Central U.S. 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 anyone.
So it all hinges on whether weather weathers or not!
By R English in 2010 Snow Magazine