When it snows it pours - salt

It is so ubiquitous that the complexity of bringing salt to your table or pouring it on your roads is all but ignored – unless there isn’t any available.

As cities up and down the Eastern Seaboard struggled with last month’s massive blizzard, there was one basic ingredient essential to clearing roads, sidewalks, driveways and steps: Salt. For the country’s two biggest salt suppliers—Chicago-based Morton Salt and Compass Minerals, based in Overland Park, Kansas—that spreading of de-icing salt represented just one step in an elaborate logistics operation. “Really, it’s a year-long process,” said Betsey Nohe, Morton’s vice-president, supply chain, in an interview with AJOT. Of course, Morton, for one, is better known for its distinctive round blue box, with the young girl, the umbrella and the rain. Table salt is also more appealing financially. According to Compass, the average cost of consumer and industrial-related salt is almost three times that of bulk highway salt.

Road Salt: Bulking Up But what’s commonly called road salt provides both Compass and Morton’s parent company almost half their salt-related revenue. It underscores a complex supply chain for a unique commodity. “For us logistics is hugely important,” Nohe said, then paused. “You do not airfreight salt,” she deadpanned. Both companies must apply sophisticated logistics analytics, mapping how to move mammoth quantities of salt in time for a winter that can be reliably unreliable. “We have to forward place our salt when and where it matters,” said Rick Ruzzin, Compass’s senior director of logistics. Morton and Compass source their salt from underground mines in North America. Morton leverages the assets of its parent company, the German chemical concern K+S. While Morton operates underground salt mines in Quebec, Nova Scotia, Ohio and Louisiana, it now sources some of its de-icing salt as well from a K+S mine in Chile, shipped to the East Coast of the US through the Panama Canal. It on occasion imports K+S salt from a mine in Germany shipped out of Hamburg. Compass operates what it says is the largest salt mine in the world in Goderich, Ontario, as well as a mine in Louisiana. According to a report by the US Geologic Survey, domestic production of salt last year increased by 9% to 44.1 million tons, with another 18 million tons imported. Total value, the report estimated, was $2.2 billion. De-icing salt accounted for 44% of use, while the chemical industry used another 38%. For Compass, in 2014, the latest year figures are available, de-icing salt accounted for $693.3 million, or 49% of the company’s $1.28 billion total revenue, but 80% of shipments. Salt Shaker: K+S & Morton K+S acquired Morton in 2009 for $1.675 billion and combined operations. At the time, Morton had reported sales of $1.2 billion on production of about 13 million tons. Morton no longer discloses its revenue figures or production totals. This much is known: In 2014, the latest year published figures are available, K+S said crystalized salt-related sales totaled Euros 1.778 billion, on production of 23.6 million tons globally. According to K+S, North America accounted for 75.8% of total salt-related volume and 73.8% of revenue. That translates into Euros 1.312 billion, or $1.426 billion and 17.9 million tons. Morton doesn’t break down market segments. In 2010, the company’s CEO in an investor presentation said consumer-related salt accounted for 45% of total revenues, de-icing 31% and industrial 23%. These product lines involve different approaches to logistics, with very different challenges. “We have a supply chain that’s focused very much on bulk and we have a supply chain that’s focused on the traditional business, consumer and industrial,” Nohe said. Morton’s immensely popular consumer line, for example, may see fairly predictable demand, but attracts a wide array of customers with what Nohe terms “varied levels of maturity.” Some are able to plan well for future needs while others need help. “That’s one big area where technology is important to us.” Morton produces consumer and industrial salt in various facilities scattered across North America that use both solar drying of ocean, sea and saline lake salt and a process that pumps water into underground salt deposits, which are then pumped to the surface and boiled. There are 12 sites alone that produce food grade salt. These products are distributed from warehouses that dot both the US and Canada. The company also exports its table salt from the West Coast to China, the largest salt-producing country in the world, where consumers value the Morton brand and its imported ingredients, Nohe said. With the salt used for de-icing, the weather is, of course, the prime motivating factor. Compass, Morton and their customers must plan far in advance. Salt Stockpiling Transportation departments tend to solicit bids in the spring; most are for one year. In the summer and early fall, salt is moved from mine to company stockpiles, then shipped to customers who fill their salt sheds. Stockpiles are refilled as more shipments from the mines arrive. “Then winter happens,” Nohe said. Compass officials describe what is called “early fill and late fill.” Before the snow season starts, an agreement is in place that guarantees 100% of the quantity of salt contracted. Another contract is more flexible. If it doesn’t snow, a customer isn’t required to purchase any additional salt. If the customer needs the salt, Compass will guarantee a certain percentage above the initial order. Those sales are mid-winter. Compass, for one, ships more than 70% of its product from plant by marine. “It’s the most cost effective and carbon emission friendly,” said Ruzzin. Compass operates a salt plant less than three miles from its Ontario mine. From that plant, which sits on Lake Huron, with a deep-water port, Compass moves bulk salt by ship to the other Great Lakes ports and up the Saint Lawrence Seaway to Quebec City. From its Louisiana plant, it barges salt up the Mississippi as far north as Minnesota. Depots are located along the waterways. Morton also transports salt by barge and ship, but to ports throughout the East Coast and Midwest. Morton operates 94 stockpiles. While both companies can ship year-round to ports on the East Coast, in the Great Lakes region, rivers and lakes can freeze. “We like to have everything in place by December and then we ship out of our stockpiles,” Nohe said. For example, Morton salt-laden ships arrive at the Port of Baltimore and unload their cargo berth-side. They create a mountainous stockpile of salt at the terminal. Morton-contracted trucks load the salt and bring it to transport department silos for Washington DC, Maryland and Northern Virginia. Department trucks can then load from the silos. However, because of its extensive network, Morton can opt for alternative channels to fill needs if necessary. For example, it may bring Chilean salt to the Port of New Orleans and then have the salt barged up the Mississippi.

Salt Logistics Neither company owns its own logistics-related assets and turns to third-party providers. Compass describes a network of trucking and material handing companies, including terminals, transloaders and warehouses. In the past, Morton relied on several hundred different shipping companies. The transportation and delivery network had become overly large, disparate and unwieldy. Despite the fact that Morton contracts some 100,000 truckload shipments annually, it felt it wasn’t benefitting from its size in terms of what it was paying. In 2014, the company completely revamped its trucking contracts, inviting all new bids. Morton ended up radically reducing the number of carriers it contracts with, from several hundred to just about 150. The result: “Higher service, lower cost, less complexity,” said Nohe. Morton is attempting to use more rail as well. Part of that is cost, Nohe said. Part is motivated by environmental considerations. Both Morton and Compass must be thorough, but they also must be quick, especially moving salt from stockpile to customer depots in the face of an impending winter storm. Morton, for one, utilizes proprietary software that allows trucks to arrive, be weighed, be filled with salt, weighed again and on their way. The driver never gets out of the truck. The entire process, Nohe said, “literally is seconds.” Compass is in the process of upgrading its supply/demand optimization technology and its carrier assignment and utilization software. Consumers and their retailers often don’t engage in that kind of planning for their bags of de-icing salt. “Many don’t necessarily have the stock,” said Ruzzin. “It’s more complicated. In a snowstorm like the blizzard that hit the East Coast, they want the product now.” In desperation, consumers will turn to whatever salt they can lay their hands on. Two winters back, Nohe explained, Morton noticed that pool salt sales had spiked. “You have to factor all that in,” Nohe said. “How much of these sales are really around intended use and how much of the sales are really weather related?”