Various factors contribute to high salt costs

Published 10:49 am Thursday, December 18, 2008

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, ODOT officials said earlier this week.

Lawrence County’s engineer said the report has its points but still leaves some of his questions unanswered.

At the request of Gov. Ted Strickland, ODOT experts examined the salt market after the state and its local transportation partners experienced dramatic spikes in the price of rock salt, with cost increases ranging from 50-300 percent above last year’s prices. Among the findings:

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— Bad weather led to historic consumption. More than 20.3 million tons of salt was used nationally during the 2007-2008 snow season, the second prolonged winter season in three years.

Not only did ODOT use a record 906,623 tons of salt, other Midwest states consumed significantly more also. Wisconsin, Minnesota, Iowa and Illinois collectively consumed 700,000 tons extra of salt. These states then placed early salt orders to replenish their stockpiles and this in turn 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 minimum-maximum 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 because of 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.

Lawrence County Engineer David Lynd said the issue of contract specifications is a valid one.

“Not only ODOT but some of the larger cities try to buy enough salt to get them through the winter and sometimes they tie up a lot of tonnage they really don’t need and that can be a problem,” Lynd said.

— 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 that 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.

Lynd said this suggestion would not help him.

“For us in particular, we generally don’t have much extra to sell,” Lynd said. “We generally don’t buy a lot of extra tonnage.”

Lynd said he is still confused about why, when bids came in earlier this year, Cuyhaga County got a bid of $41 a ton and he got one of more than $150 and the ODOT report does not address this disparity in bids.

To read the complete Analysis of Ohio’s Road Salt Market and 2008-2009 Price Increase, log on to ODOT’s Web site

at: and visit the Smart Salt Strategy Section.