Chemical shortages, price spikes challenge water utilities

Jan. 15—MANKATO — It hasn't been a problem for Mankatoans when they've turned on the tap, hit the shower or flushed the toilet, but extreme unpredictability in the industrial chemical market has been challenging for the municipal workers who ensure that clean water reliably arrives at every home and business.

"I'd say the last year and a half, the supply chain has been an issue and transportation has been an issue," said Assistant City Engineer Michael McCarty.

And price continues to be an issue. When the City Council this month was asked to authorize the purchase of chemicals used at the municipal water plant, the typical annual contracts with vendors were nowhere to be seen.

"Due to the continued volatility of pricing and availability of water treatment chemicals, staff has moved to quarterly quotations for chemical supply versus annual bids," a memo to the council explained. "Many suppliers are not currently willing to honor or bid on an annual contract due to the current market conditions."

It's anything but a local problem. A survey by the American Water Works Association found that 45% of water utilities reported issues with purchasing chemicals, up from 4% two and a half years ago.

Media reports last fall cited a doubling in the price of industrial chemicals between May 2020 and July 2022. Doubts about the supply chain prompted some cities to stockpile chemicals after waiting sometimes for months for vendors to make deliveries.

Boston Public Radio station WBUR in September focused on problems on the East Coast, particularly with the critical water disinfectant chlorine. The bidding agent for a consortium of 75 municipal water and wastewater departments in New England said he had fielded calls in the summer from members who told him, "'If I don't get chlorine in the next week, [there] would be front page headlines in the paper because I'll shut off all my water.'"

A year earlier, water systems in California, Utah, New Mexico and New York asked the EPA to activate for the first time ever a provision of the 1974 Safe Drinking Water Act that allows the federal government to order vendors to prioritize public water utilities when delivering chlorine, according to BloombergLaw.

Oceanside, Calif., was among the cities requesting help after it stopped receiving regular deliveries of sodium hypochlorite—commonly known as bleach— and was down to about a five-day supply.

"That is not a good place to be because, if you miss another load, we're talking about drinking water supply for 170,000 people," the Oceanside water division manager said. "That's a lot of people to not have drinking water."

Just last October, the Jamestown Sun reported that an unplanned shutdown of a plant that produces carbon dioxide had left roughly 20 North Dakota municipalities facing price spikes and an unstable market for a critical component of their drinking water treatment systems.

Mankato never reached a point where chemical stockpiles were on the verge of being completely depleted, according to McCarty. But the city is relying on a declining menu of suppliers. There's also an increasingly limited number of trucking companies with the special licenses and expertise required to transport certain chemicals such as chlorine.

"We're down a lot of times to one vendor serving our region," he said.

Rising prices were factored into Mankato's 2023 budget, which allocated $816,000 for chemical purchases — 15% more than 2022. The quarterly purchase approved by the council last week, though, carried prices that were 25% higher than the already inflated expense that was anticipated. If that holds through the remaining nine months of the year, the city will be $64,000 short of what's needed despite the 15% added to the budget from 2022 levels.

McCarty was hopeful, however, that future quarters of the year will bring a substantial drop in prices. Vendors were pushing for three-month supply contracts rather than annual ones not only for their own protection but also because there is a real possibility of a big plunge in prices in the months ahead.

"Our suppliers were good, (saying) 'We don't want to lock in a price because prices could be dropping, too,'" he said.

Some of the chemicals used in water treatment and sewage treatment are byproducts of refining processes involved in producing chemicals for a variety of major industries. When the pandemic curtailed production in those other industries, availability of the byproducts plummeted as well, McCarty said. So the hope is that stabilization of the broader manufacturing economy will bring more stability in the supply of those byproduct chemicals.