Salt Shortage

February 8, 2018

Below you will find a newsletter on the current salt shortage.  The local and regional supply of salt is quickly dwindling and costs are skyrocketing.

We ask all of you to read this important information. This is a fact and is beyond Great Lakes Landscaping and our client’s control. The best quick examples that I can point out: a shortage on lettuce can be caused by bad weather in California and the price spikes.
We all pay the increase.  This is exactly the same issue of supply and demand.

YES, THERE IS A SALT SHORTAGE

There is a shortage of salt in the upper Midwest states.
A combination of factors have been the cause.
1. The largest salt mine in the western hemisphere suffering a seismic shift during the summer months cut production by 40-50%
2. Waterways freezing over thereby not allowing vessels that carry new supplies to navigate them
3. Other regions of the country such as Chicago and Milwaukee that also have winter weather
competing for the same salt that we are (and they are in many cases paying the salt companies more than we are)
4. A very busy winter so far and below normal temperatures requiring more salt to melt the snow and ice.

The shortage finally made the news this week with a story on WXYZ. Although the shortage has been going on for a few weeks now, it had not made the news because the road crews have been able to get the resources they need so public safety on roadways has not been an issue. However, the private sector has been impacted for a few weeks or so now. Supplies have dwindled and prices have risen. Private snow removal contractors have seen prices double in most areas and even triple in some. At some point if the trend continues and new supplies do not make it to the docks, we will simply run out of salt altogether no matter the price.

The link to the story on WXYZ is below.
https://www.wxyz.com/news/region/oakland-county/metro-detroit-contractors-facing-salt-shortage-as-more-snow-is-in-the-forecast

The facts are that the various government entities have first priority over any available salt. This is for obvious reasons of public safety. Although not currently needed, there is a provision that allows the State to step in and through an executive order secure all salt supplies for government use. What has been done though is that salt companies that have government contracts have suspended shipments to the commercial market or private sector. Salt companies with relatively low government contracts this year have had more salt available for the commercial market but that has now dwindled.

Most contractors are adjusting their operational methods. You will probably see more scraping in lieu of salting. You are likely to see less salting done overall. Without enough salt to service entire parking lots the best most contractors will be able to do is to salt drive aisles only. Icy parking lots will become the norm rather than the exception.

In the short term, most contractors are willing to take a financial hit to service their customers. However, in the long term, as it is only early February with what looks like a lot of winter to go (at least this coming week) it is not sustainable. With two factors to consider (is salt even available and at what cost), property managers and property owners should look at ways to work with their contractors to either provide additional finances to cover higher salt costs, or develop a strategy that will provide a minimum acceptable level of service that will not break the bank of property owner or contractor. Contracts are something that some property managers/owners hide behind expecting the contractor to “live up” to the contract. In this case it really is not that simple. The salt shortage is well beyond the contractor’s control and well beyond the property owners control. If the property owner/manager values his/her contractor and values their tenants, they owe it to themselves to work together and massage the expectations put on the contractor.

Some contractors have their own salt dome (we do) . Some contractors rely on local retail supply yards such as Main’s Landscape in Southfield, Angelo’s Supplies in Wixom and Farmington Hills, Dale’s Landscape Supplies in Roseville, etc., etc. There are many in southeast Michigan and nearly all of them have found it difficult the past few weeks to keep their bins full. In fact, several have run out completely during snow events. For most, when it normally takes a day, maybe two to get their salt domes full again, it is now taking days to only get a fraction of what they normally hold. Even these local suppliers are paying higher rates through the salt companies that have had salt available. These salt companies are capitalizing on the situation.

All of these suppliers as well as contractors with their own salt domes, can only keep “x” amount of salt in inventory. Depending on each one’s needs, they may keep enough in inventory to make it through 5-6 events. They then must place orders with their respective suppliers for more. It typically takes no more than 2 days to receive an order and have it trucked in 50 ton loads to their facilities. This, unfortunately, has not been the case for the past 3 weeks now. Loads have been severely limited in most cases and not coming in others. In some cases, contractors paid a deposit back in the fall and signed a contract for a quantity of salt at a set price they thought would be sufficient for the season. Unfortunately, the salt companies that are supposed to supply this salt have suspended all commercial accounts. Even the contractors who “did the right thing” are not able to get the salt they need.

The reality for any contractor, or any company of any type that deals with a commodity, is that there is only so much cash that can be tied up in inventory and only so much space to store needed materials. The size of the contractor means nothing as storage of salt is all relative. In reality, some smaller contractors may actually find it easier to keep enough salt in inventory than larger contractors. The larger the contractor, the more they need. Larger quantities are not currently available. Some contractor’s may be OK in the short term with enough salt for a few events. However, the ability to re-stock will be the big question. Every entity that uses rock salt as part of their winter maintenance program or business must rely on the supply chain to bring in new supplies. When that supply chain is broken or compromised in any way, it creates the situation we currently find ourselves in.

Prices for available salt in the marketplace have risen to a point where the average contractor has trouble paying higher costs as well as coming up with the cash to pay for salt in advance. With the winter being as busy as it has been, most contractors are seeing higher costs for labor, fuel, repairs, etc. leaving little spare cash to pay for salt in advance at those higher costs. While some credit terms are typically available to most contractors during “normal” times, advance payment is required when prices skyrocket and supplies are purchased either from local suppliers or when purchased from other markets.

Some salt has been coming in from out of state. Trucking through other states, particularly Ohio, is limited to 25 ton loads. So, not only is the cost of the salt higher, but trucking costs are doubled because they only carry half of what trucks carry in Michigan. Efforts by contractors are many times underestimated. Good contractors are doing what they can to find ways to take care of their customers. How long any supplies can be found from other markets is unknown. What supplies, if any can be found locally is unknown. They seem to crawl out of the woodwork at times. Locating and getting salt from other markets can take some work. It can also come at considerable risk. During the 2013-2014 salt shortage, contractors were buying salt from out of state. Some of that salt was wet and froze into huge chunks that were useless. Some of it ended up being cut with a lot of sand. Another risk is that a contractor buys salt at a higher price to service its accounts and ends up sitting on an inventory of high priced salt all summer. So, all of this does come at a cost.

It is my humble opinion that contractors should not have to risk going out of business to fulfill a contractual obligation for circumstances well beyond their control. This should be a shared responsibility to find solutions that work for both parties. The goal of everyone involved should be to provide the best possible service to the tenants that pay the bills, at the least possible cost. Depending on the type of property, and the clientele, property owners may choose to offer additional compensation to the contractor to continue to provide a high level of service and keep pavement surfaces as clean as possible. Other sites may choose to lower expectations because budgets are already tight. In either case, it is fair to say that good contractors will try to do everything they can to service properties to the best of their abilities with the resources they have available to them. But, one of those resources may very well not be rock salt for much longer.

Are there alternatives out there? I urge you to work with your management team and work with your contractor(s) to develop a strategy that is acceptable to all. We will get through this. We made it through the 2007-2008 season and the 2013-2014 season. How well we make it through and what lessons we learn will be the key to future property owner/contractor relationships, future contract negotiations, and perhaps re-writing contract specifications and Scope of Work documents to address these type of issues in advance.

 

All of us at Great Lakes Landscaping are working hard to solve this issue and keep your costs at a minimum.

We are looking at all options, liquid deicers and sanding and reduced coverage areas.  This has happened before and will happen again.

Let’s work together to find a solution that works for all of us.

 

 

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