A Crystal Clear Pool Will Cost a Lot More This Summer
Opinion
Brooke Sutherland
Temperatures are rising across the US, and so is the cost of the chlorine tablets commonly used to sanitize the water in swimming pools. A 35-pound bucket of trichlor tablets is typically enough to last the average owner of a midsize pool an entire summer. That bucket costs $199 now at Leslie’s Inc.’s pool-products stores before any promotions, up from $149 last year and $99 in 2020, Chief Executive Officer Mike Egeck said in an interview. That’s a doubling of the price over just two years, a much more significant jump than the headline 12.8% increase in the Bureau of Labor Statistics’ non-seasonally adjusted consumer price index. Tablets are more popular because they’re easy to administer through the skimmer basket or an automatic dispenser, whereas granulated or liquid forms of chlorine have to be applied manually and are more of a stopgap. Other alternatives include equipment that generates chlorine from salt through electrolysis and ultraviolet light or ozone-based sanitizing technology that requires limited chlorine supplements. Consumers are increasingly favoring these systems for new pool construction, but they entail a heftier upfront cost that can run into the thousands of dollars; that makes them a tough economic sell to existing owners. So that means many American pool owners will have to hold their nose on the higher prices or plan for a summer when their backyard swimming hole look more like a swamp. “No one is happy about paying $100 more, but it’s $100 more to use the pool for four to six months. Per month it’s a smaller amount and an asset that everyone wants to use,” Egeck said. Even with price increases, “when we have tabs available, people choose tabs. They’re familiar with them and it’s easy, most importantly.” Why are chlorine tablets so expensive? Last year, there was a shortage of tablets after a fire in the wake of Hurricane Laura took out a Louisiana trichlor plant that was responsible for a significant portion of the production for the US market just as the pandemic boom in home-improvement spending ignited a wave of new pool construction. Leslie’s had to ration purchases of chlorine tablets to one bucket per customer. Those supply problems haven’t gone away, and pool-products retailers are also grappling with shortages of automated equipment that depend on semiconductors. But companies are better prepared this year with alternative procurement plans and aren’t as worried about bare shelves. “From a component standpoint and the general supply chain, we’re seeing everything elongate — things that used to take three months now take six months,” Moyo LaBode, Leslie’s chief merchandising officer, said in an interview. “We have certainly gotten ahead of it. But supply chains continue to be stressed for a variety of reasons.” BioLab is investing $170 million to rebuild the facility that burned down and is reportedly on track to reopen the factory by the end of the summer, so that will help theoretically. But the bigger problem is the domestic supply of chlorine, one of three main ingredients for the popular trichlor tablets along with caustic soda and urea. Olin Corp., the world’s largest producer of chlor-alkali, has reduced its production capacity at plants in McIntosh, Alabama; Freeport, Texas; and Plaquemine, Louisiana in a bid to move away from higher-cost, lower-return businesses. OxyChem — a division of Occidental Petroleum Corp. — closed a chlor-alkali plant in Niagara Falls, New York. Chlorine is also used in PVC, a plastic polymer commonly known as vinyl, which has applications in construction and manufacturing that tend to be higher value than swimming pool tablets. Between growing demand for PVC and reduced production, the amount of North American-sourced chlorine available to US trichlor manufacturers has decreased about 20%, Egeck of Leslie’s said on the company’s earnings call earlier this month. The resulting raw material pricing pressure “is going to be a shift that will last in perpetuity because there aren’t new facilities coming online,” LaBode said. Imported chlorine can help bridge some of the gap, but it’s more expensive because of the additional freight and handling costs and the drag of tariffs and anti-dumping duties, in some cases. Meanwhile, the cost of urea — another key ingredient for trichlor tablets — has jumped fourfold over the past year because of the impact of Russia’s invasion of Ukraine on exports from those two key producers of a commodity primarily used as fertilizer, Leslie’s said in a presentation. “Given these challenging supply dynamics and continued robust demand, we believe it is highly unlikely the cost of trichlor and the retail price of chlorine tabs will go down in 2023,” Egeck said on the earnings call. Even with the inflation, Leslie’s isn’t seeing any pullback in demand for chlorine tablets yet — in part because of the aforementioned swamp problem if customers try to go without. Pool construction also continues to march higher, according to equipment manufacturers Hayward Holdings Inc. and Pentair Plc. There were 117,000 new in-ground pools built in the US last year, according to figures from Hayward, up from 78,000 in 2019 but below the pre-financial crisis annual trend line of 153,000. The one area where Leslie’s has seen a bit of a slowdown is in more discretionary add-ons, such as pool floats and patio furniture. Something to think about as investors head into the Memorial Day weekend, which unofficially kicks off summer in the US, and try to figure out what exactly is happening with the American consumer. Bloomberg
from Asharq AL-awsat https://english.aawsat.com/home/article/3670366/brooke-sutherland/crystal-clear-pool-will-cost-lot-more-summer
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