The salt bubble

By, Jason Dailey, Director, Public Works

News organizations that cover the economy frequently cite the housing bubble, the dot.com bubble, and the oil price bubble of 2008 as examples of the chaos created by rampant speculation in the market. But over the past year, municipalities in western Pennsylvania experienced a classic bubble economy of their own – one which broke this summer, causing prices to crash through the floor. I’m talking about road salt.

As recently as two years ago, there was a general balance between supply and demand. For local governments in this area, the delivered price for rock salt, which is mined most intensively in northern Ohio, was about $48 a ton. It varied somewhat from year to year, but generally within a fairly narrow band of pricing.

But then last winter, there was a price spike which caught a lot of communities off guard. Dry weather meant the rivers were low, so barges had trouble moving. Fuel costs for mining operations had skyrocketed. The previous winter had depleted the companies’ salt inventories. And so on. As a result, supply fell below demand and prices went through the roof. If a community was lucky enough to get a delivery at all, they paid the spot market price of $155 a ton. So a lot of municipalities made due with cinders and stone.

Of course, as soon as the price tripled, everybody in the mining business threw themselves into the act, so now there’s an oversupply and prices have crashed to around $50.

Cranberry was fortunate. We were able to salt away enough at $42 to hold us through the bubble and into this coming winter season. But just because it was cheap didn’t mean went through it recklessly; we made sure all the truck spreaders were calibrated properly and we kept a close eye on how much material was being used. Nobody knows where prices are headed going forward, but with our salt shed now holding nearly 6,500 tons – more than enough for an average winter here – we should be in good shape for the upcoming season.