“Where did all the salt go?”

This question is coming up increasingly in the market this week as buyers and end users are running into supply problems and lack of availability on deicers.

The last four to five years has seen a trend toward a “just-in-time” inventory management approach work for many snow contractors given the infrequent storms of previous winters. However, when we get into a pattern of snow every few days -- which is the situation now -- it is inevitable that the velocity of demand will overwhelm and choke the supply system.

The reasons behind the “where’s the salt?” answer are both simple and complex.

On the simple side, demand has exceeded supply in some regions and with some suppliers. On the more complex side, the answer has many layers and contributing factors.

Generally speaking, most suppliers of bulk salt will take their best guess estimate at what they will need in a given winter and then schedule ships, trains, and timing and build stockpiles accordingly. They use professional weather forecasting, historical sales data, and customer estimates to make a decision on how much salt to put into any stockpile location.   

There is only so much space on the ground for storage. In a perfect world, suppliers might pile up a year or more of inventory in their stockpile. But understanding the costs associated with that approach will help readers to understand why that never works.   

The first and most important issue from the supply side viewpoint is the customer estimate. These estimates must be accurate because all of the economics are based on it. For example; if someone estimates they will require 2500 tons of bulk salt for the winter, and then it doesn’t snow, the supplier is left holding all the tons that were not delivered and paying storage on them and loss of revenue from not selling those tons. The carrying costs continue to fall on the supplier.

On the other hand, if the customer burns through those 2500 tons with six weeks of winter left, then the supplier is tapped out because they based their stockpiles on the estimates. This is why most salt suppliers use contracts; to avoid over-selling.

Those who follow my State of the Salt Address newsletters and articles will know that I’ve called for the end users and the market to accept more risk to avoid being caught in a shortage.

To that point, every buyer should have at least five storms of inventory on the ground when the season starts, and then continue to reload that to the five storm minimum as product is used maintaining five storms of inventory throughout the winter.

Only municipalities practice this approach, which is largely why municipalities are the last to experience shortages. But they too are not immune.

From the supply side, there are a lot of factors that enter into the decision tree with regards to scheduling delivery of salt for the stockpiles.

• Which regions are expected to be hardest hit?
• What did they take last year?
• How many events last year?
• What is predicted for this winter?
• What can determine based on historical averages?
• What are the economics of bulk vessels and rail in-season versus off-season?
  

It is more expensive to move bulk in winter in nearly all cases, so many will pile to the maximum in the spring and summer when costs are generally lower and try to push those tons into their customer base so they can reload to the maximum.   

The fleet of bulk ocean vessels shrunk significantly with the implementation of IMO2020: the law demanding ultra-low sulfur fuel and scrubbers for the ship’s emissions.    Most couldn’t comply. Some newer ships that couldn’t comply at their regular cruising speeds, found that they could comply by reducing speed by thirty plus percent.   Now the voyage from point A to point B will take longer, and therefore cost more making even the perceived inexpensive vessels now expensive.

The weather pattern that we are in currently is going to hang on for at least another 10-14 days. Forty five percent of the US is covered with snow as I write this, and another arctic blast that will reach to the Gulf of Mexico is coming, further stressing already low stockpiles.

Shopping around is futile as the suppliers that have carefully balanced the demand and contract estimates from their customers will not “rob Peter to pay Paul” -- so no luck there.

What you can expect for the balance of this winter? It will get worse and could get a lot worse. On the plus side, we are very late into the winter and when this final cold does pull out, it will be very unlikely for its return. Had this all happened in December and January, we would be in deep trouble as an industry on a broad scale.

I need to also talk about packaged deicers, as they too are pretty stressed right now.

The problem in packaged deicers, interestingly enough, is not lack of inventory so much as it is managing the demand velocity. While we have plenty of packaged product inventory, nationwide trucking shortages caused by reduced over-the-road driver availability coupled with winter driving conditions nearly half of the nation have caused delays on the few available trucks on roads making deliveries DOT rule changes also have put additional pressure on the over-the-road drivers because of new DOT regulations on driving hours.

Hours waiting line to load are counted as driving hours now, so a driver that is in a five hour loading cue (which we are seeing right now) finally gets on the road to their destination and then have to layup for required rest time. Now, an expected a same delivery stretches into multiple days.

Lastly, there is a major problem in ocean shipping by container.

The entire system is out of balance. It’s complex and hard to grasp all the factors involved but 20,000 TEU vessels obsoleted smaller container ships and actually created shortages in vessel space availability. This has led to astronomical price increases and problems.   

You can search the Internet for information on this problem, but it will continue to plague the global ocean transportation and drive prices through the roof where they are already. Realize that a significant amount of packaged deicers have used ocean container shipping and this will further pinch an already challenging condition.  

DHL published an informative article in their February 2021 update that is worth reading if you want to understand this and future impact on costs of ALL goods: CLICK HERE to check it out.

Snow Magazine readers can hopefully begin to see how all of these issues have combined into a perfect storm of conditions to put some suppliers – not all by any means - into the current shortages.  I should also mention that we are fine with supply of all products, however, we are not able to take on new customers at this time and are focused only on our existing customer base.

Contributing Editor Robert S. English is president of Chemical Solutions Inc., based out of Franklin, Mass. He writes often about issues pertaining to the salt and deicing industry including his regular State of Salt columns. You can reach him at rob@meltsnow.com

Cargill announced Thursday, Jan. 28, the permanent end of salt production at its mine in Avery Island, La., nearly a year ahead of schedule.

The company had planned to halt hoisting salt from the mine later on Dec. 31, 2021 because the lease, with the landowner Avery Island Inc. expires at year-end.

“For over 24 years, we have been proud to be part of the Avery Island and New Iberia communities,” said Sonya Roberts, president of Cargill’s salt business, in a statement. “This was a difficult business decision, but ultimately the right one as we considered the future economics of the mine’s operation and our production capacity until the end of the year. We’d like to thank Avery Island Inc. for their partnership over those years and thank our hard-working employees who have made the mine successful.”

Roberts indicated the company, at this time, does not anticipate any supply issues for its customers. “We are confident we will be able to fulfill our customer obligations and do not expect disruptions to their operations,” she said in a statement. “Our supply chain is robust and we remain committed to investing in our other operations while continuing to grow our salt business.”

So what does this mean for professional snow and ice management industry, especially contractors who purchase their winter salt from Cargill?

Rob English, president Chemical Solutions Inc. and Snow Magazine contributing editor covering the salt and deicing industry, says he does not expect this move to have any discernible impact on the deicing market.   
“Cargill operates 22 other facilities producing salt,” English says. “While Avery Island is one of three mines dedicated to highway salt, Cargill does not expect any disruptions in supply at this time. “

The Avery Island mine is over 150 years old and has been plagued with problems; most recently a collapse in mid-December that resulted in two fatalities. English says Cargill -- which produces upwards of 14 million tons of salt annually for all applications from food, feed, water softeners, and deicing -- had planned to idle and close it by 2024, but recent events have advanced that schedule.

“Cargill has been challenged with mining operations in recent years including the Cayuga, NY, mine and mining under Lake Cayuga have concerned abutters regarding water quality and safety,” English says. “Mining is not a simple business and can be fraught with unexpected challenges.  Take the Diamond Crystal Lake Peigneur, La., disaster in 1980. This event is a dramatic example of how quickly a salt mine collapse can wreak havoc in hours.”

CLICK HERE to watch a short video on the Lake Peigneur Salt Mine disaster.

While Cargill will no longer produce salt from the mine, the company says there is still a significant amount of work that needs to be done at the mine to safely close the facility which will likely take until 2024. A detailed site closure plan has been established outlining work activities. The company is working with employees to offer a variety of support services as they are needed.

According to Cargill, Avery Island is one of three salt mines operated by the company, headquartered in Wayzata, MN. All three mines produce deicing salt that is used to keep roads safe and clear during the winter months throughout the U.S. and Canada. Cargill also operates a salt evaporation facility in Breaux Bridge, La., where the company is expanding capacity and increasing efficiency. Those facilities are not impacted by this announcement. Cargill also operates 22 other salt production locations that produce, package and ship salt for road deicing, food, water softening, agricultural, industrial and packaged ice control products.

Mike Zawacki is editor of Snow Magazine

Despite recent economic upheaval, equipment acquisition continues to drive supply chains across all U.S. manufacturing and service sectors.

Nearly eight in 10 of U.S. businesses use equipment leasing and financing to acquire the productive assets they need to operate and grow, says Ralph Petta, president of the Equipment Leasing and Finance Association (ELFA) which represents the nearly $1 trillion equipment finance sector.

"Businesses need to understand the market environment more than ever to make their strategic equipment acquisition plans," Petta says.

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ELFA distilled recent research data in compiling the Top 10 Equipment Acquisition Trends, including the Equipment Leasing & Finance Foundation’s 2021 Equipment Leasing & Finance U.S. Economic Outlook, industry participants’ expertise and member input from ELFA meetings, in compiling the trends.

ELFA forecasts the following 10 equipment acquisition trends for 2021.

The U.S. economy will be a tale of two halves.
The effects of the pandemic will continue with business restrictions and suppressed spending during the winter months. GDP growth will be weighted toward the second half of the year once vaccines are widely available, and the upside potential for economic growth later in the year is substantial with 4.7% GDP growth forecast for 2021.

Capital spending will show positive growth.
The way that millions of Americans live, work and socialize was impacted by the pandemic and required many businesses to reconfigure business operations. This is likely to continue in 2021, providing a sustained boost to equipment and software investment in the first half of the year, resulting in positive 7.8% growth for the year.

A vast majority of U.S. businesses will acquire equipment through financing.
The propensity to finance equipment is higher than it has been over the last two to three years as long-term interest rates have fallen sharply. The Fed is committed to keeping interest rates at or near zero for several years, which bodes well for businesses seeking financing. The Fed’s infusions of liquidity into the money supply also make cash more available and stabilizing for the economy.

Customer demands and products will evolve beyond pandemic needs.
Demand for equipment needed to connect employees working from home will change as organizations adopt hybrid workplace models and make other adjustments for conducting business. The growth of bundled, managed services agreements and efficient customer service solutions will continue as businesses seek greater support and flexibility in acquiring and managing equipment. Reduced travel, less need for commercial space and technology upgrades will be among wide-ranging impacts in the wake of the pandemic.

Many key equipment types will show growth as a result of the pandemic.
Broad-based investment growth is expected across a range of equipment types after plunging to historic lows in Q2 2020. Medical equipment should benefit from vaccine distribution and resumption of elective medical procedures. Construction equipment investment should improve with increased demand for single-family homes, while trucks will get a boost from demand for over-the-road transportation as consumer spending strengthens throughout the year. Travel, airlines and hospitality will continue to be negatively impacted until full deployment of vaccines.

Digitalization will be pervasive in the post-COVID equipment finance environment.
Innovation from the digital adoption of modern smart technology and business models built around that technology will leap forward in equipment finance in 2021. E-signatures and e-leasing, deployed rapidly during the pandemic out of necessity for contactless transactions, will continue to be widely adopted. E-commerce solutions will continue to skyrocket to meet customer demands. Also expect equipment finance companies to continue to create remote and contactless back office operations, and speed of processes, with compliance a priority.

Federal and state government action could have wide-ranging policy implications.
The change in presidential administration along with Democratic control of both chambers of Congress could impact business investment decisions in a variety of ways. Washington policy makers could make significant changes in areas from taxation to infrastructure spending to climate policy and regulation. In addition, fiscal pressures and the blurring of consumer and commercial laws in some state legislatures may lead to policy proposals that restrict or otherwise make more difficult commercial financing transactions.

Cybersecurity will take on renewed importance.
The heightened use of digital and contactless methods for transactions, data and information exchange during the pandemic—with customers as well as between work-from-home employees—will bring renewed focus to the need for effective cybersecurity strategies. With the proliferation of bad actors and fraudulent transactions, businesses will increase proactive measures to protect their data.

China will play an outsize role in determining market demand from key end-user markets.
China is the world’s only major economy expected to have expanded in 2020. A strong recovery there will support demand for U.S. exports and should be a tailwind for American manufacturers and the broader economy.

“Wild cards” could play a role in business investment decisions.
There are other areas in addition to the trends above that businesses will keep an eye on that could impact their equipment acquisition strategies. The efficient rollout of COVID vaccines and their widespread acceptance will be critical to resuming a semblance of normalcy. Stock market volatility, small business recovery and a rise in inflation could all have potential financial impacts.

It’s important to note that next week – Jan. 24-30 – is National SnowCare for Troops Awareness Week, which will spotlight the valuable work being performed by hundreds of dedicated professional snow and ice volunteers across the country.

Now in its 11th year, SnowCare for Troops has evolved into more than just a service to clear driveways and sidewalks of snow and ice. It’s a lifeline for military families to help maintain their independence and go about their daily routines taking care of family, work and school, and for essential healthcare professionals to carry on their vital work.

“The need to assist military families, healthcare professionals and first responders serving overseas or on the front lines of the pandemic with snow removal services continues to grow, and SnowCare for Troops and the SCFT Cares for Our HealthCare Heroes initiatives will be there,” says Cindy Code, executive director of Project EverGreen, which oversees SnowCare for Troops and its sister warm-season initiative, LawnCare for Troops. “With the continued support of our thousands of volunteers and our program sponsor BOSS Snowplow, it’s our mission to continue grow the program and provide the support that many families need during these challenging times.”

The SCFT Cares for Our HealthCare Heroes program expansion runs through April 1, 2021.

BOSS supports SnowCare for Troops because the company has seen firsthand the impact it has on military families, says Mark Klossner, director of marketing, BOSS Snowplow. “We are grateful for our armed forces and the freedom we have because of their sacrifice,” he says. “This is one way we can show our support and appreciation.”

Many of you in the snow industry already participate in this program. But if you’re looking to get involved, CLICK HERE to visit the Project EverGreen website for more information and to register as a volunteer.