Ohio Studies Reasons Behind Sky-High Road Salt Prices
COLUMBUS, OH --- An analysis of the road salt market by the Ohio Department of Transportation (ODOT) points to a combination of historically bad weather, inflexible contract specifications, and questionable bidding tactics as driving forces behind an unprecedented increase in salt prices.
At the request of Gov. Ted Strickland, ODOT experts examined the salt market after the state and its local transportation partners saw dramatic spikes in the price of road salt, with cost increases ranging from 50 percent to 300 percent above last year's prices.
The report, delivered to the governor's office this week, details the factors leading to less competition and higher prices in the salt market. Among the findings:
-- Bad weather led to historic consumption. More than 20.3 million tons of salt were used nationally during the 2007-2008 snow season, the second prolonged winter season in three years. ODOT used a record 906,623 tons of salt. Other Midwest states consumed significantly more -- Wisconsin, Minnesota, Iowa and Illinois collectively consumed 700,000 tons extra of salt. These states then placed early salt orders to replenish their stockpiles, which depleted reserve supplies and drove up prices.
-- Contract specifications led to artificial shortages. Ohio uses contracts that set a minimum amount of salt the state guarantees to purchase and a maximum amount the contractor must make available. Typically, the min-max contracts are set at 50-150: the state agrees to buy 50 percent, but may purchase 150 percent of the contract's volume. As a result, for every one ton a salt supplier is assured to sell, it is legally obligated to stockpile two extra tons of salt. The need for suppliers to maintain such large inventories of salt due to these contracts results in a considerable portion of available materials being taken off the market. In practice, however, it’s unclear whether Ohio's salt vendors are even able to deliver the full 150 percent of any particular contract.
-- Domestic preferences led to reduced competition. Of the five Midwest salt-producing firms, only Cargill and Morton Salt operate mines in Ohio. Under the state's domestic preference statutes, these two firms are guaranteed to win contracts when competing against each other. During this year's state bidding process, however, ODOT received only one bid in many counties from either firm; Morton and Cargill never competed head-to-head. Revising the current domestic preference rules could encourage more competition and eliminate the type of county-by-county monopolization behavior experienced across the state.
The analysis also offers recommendations for future salt contracts which should reduce the likelihood of a repeated spike next season. Most notable is a recommendation to encourage more local governments to work closely with ODOT to purchase salt.
The report suggests that Ohio agencies work together to develop an information network to buy and sell salt between one another, thereby allowing agencies with too much and those with too little to share their pre-existing salt inventories before purchasing more salt from the mines.
Because of the rising costs, ODOT drivers have reportedly been instructed to cut the use of rock salt by 30 percent, according to an article in Mount Vernon News. A number of drivers interviewed by the newspaper expressed safety concerns about the new "Smart Salt Strategy" implemented to cut costs. Some Ohio communities mix the road salt with grit or cinders.
Some other states, such as Missouri, have experimented with mixing road salt with salt brine and beet juice, a concoction that can melt ice at extremely low temperatures. The state of Oregon, on the other hand, relies on sanding and magnesium chloride.