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Liquid Gold

By:
  • Dale Keep
- Posted: April 25, 2018
Recently, a client tossed out a price quote, claiming that salt brine could be manufactured at 8 cents to 10 cents a gallon. Overhearing the quote, I challenged this statement. 

A cost of manufacturing analysis for salt brine, using the client’s numbers, was conducted and compared to the delivered price of a liquid deicer available locally. The statement that using manufactured salt brine costs less with all factors considered was not correct in this case. The product available for purchase (mostly salt brine) under a true cost analysis, including performance considerations, fared better since it had a 15% to 20% higher melting capacity and works at colder temperatures. We used the 15% factor for other pertinent facts for analysis and the results were an eye-opener. 

This client is now doing what makes financial sense in the day-to-day operations but is leaving thousands of investment dollars in the bank - money that would have been required to set up a salt brine system. Remember, you need more than a brine maker; you need a brine system with manufacturing ability, storage, loading and so on, to be in the brine business. 

Cost is more than purchase price
Before showing actual calculations, understand that the cost of brine is not just the purchase price of the salt used to make it. This is a common misrepresentation. So, how is the true cost of manufactured salt brine revealed? In addition to the salt price, we must also consider the indirect costs that go into salt storage and brine making once the brine is ready to be used. These indirect costs include labor, equipment, material, depreciation and facility costs. 

Identifying all cost elements in your process and using accurate numbers is key to determining your true cost. In your operation, you may add a cost not included in this example, such as transportation for the finished product. The cost per gallon at the site of manufacture is not the true cost of the product since it is at the remote facility. Or, your equipment and/or facilities may be financed, so you will need to include interest cost on financing. The elements identified and used in this example are not intended to reflect the true cost of properly made salt brine for any operation. It’s up to you to determine the true cost for your manufactured brine by using a similar methodology. 

Labor
Assume a brine-making employee’s gross hourly wage is $15 per hour, but that is not the total cost to allocate for his position. His real cost must include a markup for payroll taxes and worker’s compensation insurance. Twenty percent is used for this calculation, resulting in an hourly cost of $18 per hour. In your calculations, an additional percentage may need to be added for health insurance or retirement benefits. 

Items often missed are salt storage (in facilities cost) and loader costs. Using $90 per hour for a loader and operator, kept busy with brine making 10 minutes per hour, equals $15. 

Equipment cleanout time must also be considered since quality brine is consistently achieved in minimal time when the brine maker is clean, with insoluble materials removed regularly. Not doing so equals costly reductions in production rates. There are many variables to consider, and $2 was used for this value. 

Brine manufacturing equipment

A working brine production system is more than a brine maker. Minimally, one also has labor, facilities, loaders, storage tanks, pumps and hoses involved in making, storing and loading quality brine. Some claim to make brine as needed to reduce storage costs. Let’s do the math for one load with assumed 20 gallons per minute (GPM) of water flow (90% or more have less) and a 500-gallon tank. If all is ready when the truck arrives, and all goes well, considering only load time based on water flow, this is about 2 cents per gallon just for labor, without considering other factors such as being out of service for an extended period. 

This example uses a total system cost of $60,000 with 10-year depreciation, annual maintenance costs of $1,000 and, at the end of the 10 years, a $5,000 value. The analytical production rate per year is 100,000 gallons. 

Another cost to consider is facilities or indirect costs. This number represents a percentage of taxes, heat, repairs, insurance and so on associated with brine making. The number used here is $18,000 for the 10 years. 

Material 
The quality of the salt purchased is a major factor in actual cost. Here again, as with tools, a higher purchase price with better results means a lower cost. A lower quality salt with a lower purchase price normally costs more per gallon for brine production than a quality salt with a higher purchase price and less waste. For this example, the purchase price is assumed to be $75 per ton with an estimated 5% loss due to unusable material in terms of brine production. 

For every gallon of 23.3% brine produced, 2.29 pounds of salt is required. With one ton of salt discounted to 1,900 pounds, the gallons that can be made are 1900/2.29 or 830 gallons. Many use 870 gallons per ton, which equates to 100% usable salt — something I have never seen other than in reagent grade salt. For this example, I have used 830 gallons for the production rate per ton of salt. 

Water is not free. Because of the many variables, $1 is used for the cost of water in this example. Bear in mind that it does not take 100 gallons of water to make 100 gallons of salt brine. Because salt takes up room, even when dissolved, it takes approximately 90 gallons of water to produce 100 gallons of 23.3% salt brine. Keep this in mind when doing brine cost calculations. Gallons per minute of water feeding the system also contribute to costs since the lower the flow rate, the longer it takes to make. 

In this example, the goal is 830 gallons of brine, which means we need 829/1.1 or 754 gallons. At 15 gpm this should take 50 minutes. Electricity is considered a material, and a cost of $1 is assumed. 

Conclusion
My goal is not to condemn in-house manufacturing of salt brine but to show that the cost of it is not just the purchase price of the salt. Unless salt is free and other factors are selectively ignored, achieving a cost of 10 cents per gallon isn’t likely. A way to get reasonably close (but likely low) to the true cost in a hurry is this formula: Purchase price of salt / 830 x 2. Using $75, the result is 18 cents per gallon. Less than the calculated (22 cents) but much closer to reality than the 8 cents to 10 cents per gallon too often quoted. 
Calculations
The cost to make salt brine starts with the purchase price of the salt, but several other factors (equipment, facilities, labor, utilities, etc.) must be factored into the equation to determine a true cost to manufacture your own brine.

Keep_Chart

Dale Keep owns Ice & Snow Technologies, a training and consulting company based in Walla Walla, WA. Email him at dalekeep@charter.net.
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