Features - State of the Industry Reports
2010 State of the Industry: Icing salt prices
5/26/2010
Better planning and more competitive pricing afforded contractors a break from the high salt prices seen in recent winters.
During the last few winters, snow contractors have been dealing with more than one tight economy. The financial climate has been difficult for even well-established businesses to weather, but heavier ice events and surprise storms made rock salt a tough commodity to afford.
Contractors hoped to stockpile mid-season, but many local governments swept up the available salt, sending both demand and price per ton to landmark highs. The cost pushed contractors to tighten profit margins even more, or risk raising prices when business owners were already looking for the best ways to cut costs.
In the 2009-10 season, supply started to meet with demand thanks to some key planning, and prices, though still high, have begun to level out, according to Snow Magazine research. A majority of those polled said they used the same amount or less rock salt last season than in the previous year, and the price stayed the same or was less for most.
With a steady direct supplier, it was a good season for Brian Greve, vice-president of Empire Landscaping and Snow Plowing Inc. in Marlboro, N.Y. Though his company got caught up in the salt shortage of the 2008-09 season, resulting in the purchase of tons of overpriced salt, he was able to build business with a reliable supplier for the following season.
Between the two seasons, Greve saw about a $20-per-ton drop in price for rock salt.
For Paul Fraynd of Omaha Friendly Services in Omaha, Neb., the change came when his company picked up more contracts and he was able to cut out a costly step last season by switching directly to a supplier.
“We used to get it from a company in town, essentially a middleman,” he says. “This year, we’ve gotten our own supply via semi from Kansas. There’s greater flexibility with it at the shop, it’s available in 24 hours if we need it and the price difference is pretty substantial.”
Fraynd found about a $30-per- ton savings in the switch, which he was able to leverage because the company picked up more contracts during the 2008-09 season, and had room to grow, he says. Despite the change in price, he’s keeping de-icing prices about the same for the upcoming season.
When snow fighters had the size to request large orders directly from suppliers, salt wasn’t difficult to come by. But for smaller contractors, like Corey Standen of Standen Snow Plowing, Alpena, Mich., the last few seasons have been about acquiring salt from the larger contractors and suppliers at a higher price. “The demand has been there, but the supply just hasn’t been,” he says. “We’ve really got one port here. The main contractor buys up everything he’s going to use, and you can buy it from him.”
During the last season, Standen cut some of the cost by purchasing bag salt through a wholesaler when he was able, still paying more than $100-per-ton.
Despite the recent growth, Fraynd remembered what it was like not to have the monetary weight to call for large orders directly. “In that season, when we were dealing with the local supplier, there was just no salt,” he says. “You’re just handcuffed to your local supplier when you’re that size. You’re always going to be chasing salt if you’re a small guy.”
Standen leveraged his company’s size by more precisely planning how much salt he actually needed for the season, saving him money. “I could do a lot of planning like this,” he says. “I tried to figure out what it would take, going off what we used last season, and measured it out. It ended up being very close to what we actually used, and this was the biggest season we’ve ever had.”
Strategic planning resulted in the most price brakes, contractors say, especially when salt suppliers offered discounts to early buyers. Greve’s suppliers take about another $15-per-ton off salt purchased before Sept. 1. He bought about half of the salt he planned for the season before the summer ended, budgeting about the same percentage for salt as he did the year prior.
“Half” was also an important amount for contractors last year. Many contractors started ordering an additional load of salt as soon as bins reached that mid-point during the season. “That’s one of the things we’ve learned,” Greve says. “It’s a very scary thing to deplete all your salt. We never let them go down below 50 percent. In the event that something should happen, we’re always sitting on an inventory.”
While governments also strategically planned to avoid the salt grab of recent years, the half-full bin buffer kept Fraynd from worrying about running out during the season. “Everyone probably planned ahead a little bit more. I kept stock available well-ahead of time. You can’t control the weather, but you can control what you have in those bins.”