As I write this, high temperatures continue to blister much of the US with two named storms in the Gulf, and I feel like it’s so hot this summer how could it ever cool off enough to snow? I know from the past 40 years of doing this for a living, weather is never predictable more than a few days or even hours in advance and in our business we always plan for the worst and hope for the best. In the snow and ice control industry, planning for the worst is really hoping for the best — at least for us.
Ownership Changes and Consolidations
There are a lot of topics to cover and at the top of the list is the on-going consolidation of winter product raw material supply sources. There have been numerous notable acquisitions and mergers in our industry this year with more still to come. It’s no secret that Morton Salt, and moreover the parent company K+S Group of Kassel, Germany, have put Morton along with their US and South American salt holdings up for sale. Lots of rumors about who is on the list and who is favored, but until the fat lady sings we can only guess. K+S is heavily leveraged (€3.1B) and need to reduce debt. While winter road salt is a portion of Morton’s business, the warm winters have had negligible impact to their struggling bottom line. COVID-19 has energized some segments of their business. Generally, I believe that Morton’s markets are roughly 1/3rd Industrial, 1/3rd consumer, and 1/3rd highway and winter products. Industrial applications include chlor-alkali production which uses salt to produce chlorine and caustic soda as co-products. Anyone with a pool knows that they are either consuming much more disinfectants such as pool salt or more chlorine in this record hot summer. Reuters reported on August 4th that “Meritage Group LP, an investment firm for the family of famed hedge fund investor James Simons of Renaissance Technologies, has partnered with U.S. salt producer Kissner for its bid, the people said. Kissner is owned by buyout group Stone Canyon Industries, which bought Kissner for $2 billion in April. Private equity investors Advent International, American Securities and Cerberus Capital Management also made it to the second round of the bidding, they added.”
One of the premium deicing product manufacturers, Tetra, have closed their calcium chloride production plant in El Dorado, Ark. They produced liquid and flake calcium chloride in this facility and while it will have some effect regionally in some markets, it shouldn’t be precipitate shortages and panic buying from closing. They’ve struggled with quality in this plant since it was constructed and sources indicate that they took a write-down of $80 to $100 million on this facility which is just barely a decade old.
OXY in Ludington, Mich., is currently the only US-based calcium chloride production facility. Rumors swirl here too that they too are for sale, but that is unconfirmed and at this point only a rumor.
An investor group (Junction Capital Partners) lead by Rick Billings purchased Wilkinson Corp. of Mayville, Mich., in May of this year. Wilkinson solution mine calcium chloride. No formal announcement about intent going forward has been made, but this could be a new calcium chloride liquid and dry source as Billings has forty years in the development of calcium chloride products and has been part of two previous calcium chloride facility developments.
In April of this year, Stone Canyon Industries Holdings closed the purchase of Kissner Milling of Ontario Canada for $2.0 billion. Kissner is generally known in both bulk and packaged deicing products and they continue to grow their footprint in the US. Whether Stone Canyon is in the mix for any of these other acquisitions is anybody’s guess, but the potential is there.
As we watch these mergers and acquisitions, know that the governmental agencies (FTC/SEC) will have a lot to say about any potential monopolizing of supply and likely will force dissolution of areas where the buyer has competitive interests already. When K+S purchased International Salt, a few stockpiles were broken up and handed over to other companies for this very reason.
The warm winter last year left record levels of deicing raw materials on the ground unsold which will burden the inventory carrying costs and could result in attempts to hold pricing even though the markets are very long right now.
On the road salt front, imported product from North Africa and other locations continue to depress pricing where water delivery of the salt is possible. East Coast US is seeing further reductions of pricing in municipal bids which foretells of price wars. Morton is a big player in bulk salt in certain markets and if they do sell, depending on who the lucky buyer is expect to see the Securities and Exchange Commission take moves to not allow the buyer to gain a monopoly or geographical market advantage.
As the industry continues to search for the silver bullet of deicing that is inexpensive and has low environmental impact, know that increasing pressure is being brought on road salt. Its pretty hard to replace given the abundance of supply and low cost coupled with effective for making roads safer, however that comes at a cost of chloride attack on metals and electrical systems and damage to infrastructure such as bridges and tunnels as well as the vehicles. Road salt pollution into drinking water and surface waters is still very much an issue, but road salt holds the high ground in deicing due to cost and effectiveness. While many additives have been tested and are used to enhance the performance and lower the corrosion of salt, we have yet to overcome the problems with one product.
At this time, there continues to be plenty of road salt in the marketplace. Obviously, a hard winter in specific geographies can deplete even the most robust inventories.
Premium Deicing Products
Not much to report here as inventories continue to be very strong in both calcium chloride and magnesium chloride. The closure of Tetra’s calcium plant will likely have minimal negative effect in deicing as that plant was largely intended to support the oil industry who use calcium chloride as a completion fluid. We have seen a few more offshore companies attempt to enter the US market for chlorides and so far, it’s not been an easy go as packaging and quality have struggled to meet the US standards. New production in Africa and India will attempt to compete in the US market in the coming year adding to an already strong position by China on these products.
Many companies and inventors continue to search for new winter products with less adverse impact on all fronts; environmental; infrastructure; vehicles. We have lots of smart people working on this but to date, no silver bullet has emerged. To this end, we too have been working on and testing a fiber based deicing product for the past few years which is 100% bio-renewable, lower cost than road salt, and, it’s 99% biodegradable. The jury is still out on our new FiberMelt product but we are hopeful as it meets two of the criteria; its non-corrosive and bio-renewable/biodegradable. FiberMelt is a fiber that is infused with a very small amount of a proprietary liquid to help the fiber adhere to the winter surface. While this is not going to be a straight across replacement for salt in all locations, it does have distinct advantages.
As is always the case, the weather is key to how the winter will go for our industry this season. Inventories are at nearly record level highs and most are prepared for what comes at least in the initial phase of winter. I do worry about the potential for record lake-effect snows in the areas that normally see it, and similarly the Eastern seaboard may have ocean effect snows if the temperatures set up inland to freeze the moisture coming off the sea. We’ve seen regional snow patterns that quickly deplete inventories so keep your eyes on supplies if things start cranking up, and keep your inventories full in the early part of winter to be assured you’ll have enough to make it the whole season.
Mergers and acquisitions will continue to change the supply sources of the professional snow and ice management industry and we the consumers and snow fighters are only observers in this context and will wait to see what changes may affect us.