This winter, the 2020 Farmers’ Almanac anticipates above average precipitation over the Midwest, Great Plains, Great Lakes and the eastern third of the United States. Chillier than usual temperatures in the Northeast and above average precipitation mean that businesses this winter can expect a significant amount of snow, as well as rain and sleet throughout the season. Snowfall and winter conditions can spell out significant challenges for businesses and facility operators, compelling businesses to adequately prepare themselves and their facilities in order to reduce downtime, minimize costs and promote safety.
Proper preparation for winter means accounting for snowfall and ice. These elements can stall operations by preventing employees from reaching businesses. By inhibiting customers from accessing stores, offices and warehouses, snowfall and ice can also interfere with revenue generation. Finally, allowing snow and ice to accumulate on walkways, staircases and in parking lots can pose a significant liability for companies. And these winter conditions are not letting up. The eastern two-thirds of the contiguous United States saw around twice as many extreme snowstorms in the second half of the 20th century than in the first. However, through the purchase of goods and services such as ice and snow surface treatments and snow removal services, companies can still run smoothly through the winter.
After the Fall: Ice & Snow Surface Treatments
Ice and snow surface treatments include a range of substances including rock salt, sodium chloride, calcium chloride and magnesium chloride that are designed to remove or prevent snow and ice build-up. Surface treatments can be used as preventative or corrective measures. For preventative purposes, buyers can spread the de-icing salt or chemicals prior to inclement weather in order to inhibit the formation of ice or the accumulation of snow. And when precipitation increases, the preventative spreading of surface treatments can stop the snow from adhering to the road, allowing for easier snow removal down the line. Alternatively, as a corrective measure, surface treatments can melt limited quantities of ice or snow and provide ground traction on roads and walkways.
ProcurementIQ recommends purchasing ice and snow surface treatments early from multiple suppliers in order to adequately spread out risk. In this market, choosing the cheapest supplier is not always the most effective strategy. Instead, buyers should aim to form relationships with several suppliers to ensure a steady supply over time. Considering recent shortages of rock salt and other deicing treatments, buyers are encouraged to also store any excess surface treatments from previous years for use in the years to come. The Midwest is at especially high risk of deicing shortages due to the saturation of the river system and increasing flooding. Many larger buyers of ice and snow surface treatments in the Midwest have switched to pre-purchase plans for greater security.
Death of a Snowman: Snow Removal Services
Snow removal services are often critical to the elimination of accumulated snow or ice, especially when snow removal requires the use of heavy machinery. Suppliers of snow removal services use snow plows, shovels, front loaders and power blowers to clear snow and ice from driveways, parking lots and walkways. Providers also use chemical agents to clear snow and de-ice surfaces, both preventatively and correctively.
Buyers can purchase these services either through a contract or on a “per-push” (i.e. as-needed) basis. However, buyers will encounter lower overall rates when they purchase these services through a seasonal or multi-year contract, which typically spans three to five years. Many providers of snow removal services, moreover, have changed their supply contracts from per-push to seasonal and multi-year contracts in recent years to account for increased variability in the supply of deicing treatments, which are critical inputs for these services.
The Ascent: Price Trends
Because ice and snow surface treatments and snow removal services are specifically aimed at handling winter conditions, their prices typically steepen as winter nears and demand rises. Prices then decline once the cold weather passes. Buyers can take advantage of these seasonal price fluctuations by purchasing supply and service contracts during the warmer seasons, when possible.
Separate from seasonal fluctuations, prices of ice and snow surface treatments and snow removal services have also been increasing year-on-year between 2017 and 2020. During this period, annual precipitation across the United States has been rising, which has helped drive demand in these markets. The growth in demand has raised suppliers’ negotiating leverage, contributing to increasing prices. In the past three years, for instance, the price of ice and snow surface treatments has risen at an annualized rate of 3.7%. Continuing the upward trend, prices are forecast to increase at an average annual rate of 3.2% in the three years to 2023. Buyers, therefore, should consider entering multi-year supply contracts for ice and snow surface treatments sooner rather than later in order to lock in prices. Similarly, prices of snow removal services have increased at an estimated annualized rate of 3.3% in the three years to 2020. Service prices, however, are forecast to grow more slowly in the next three years, rising at an annual rate of 0.9% on average. This subdued price growth means that buyers can take additional time to evaluate vendors before locking in rates.
By: Remi Nathanson