Temperatures are rising in the United States, and so is the cost of chlorine tablets commonly used to sanitize swimming pool water.
A 35 pound bucket of trichlor tablets is usually enough to last an entire summer for the average owner of an average sized pool. That bucket is now $199 at Leslie’s Inc. pool products stores before any promotions, up from $149 last year and $99 in 2020, general manager Mike Egeck said in an interview. That’s a doubling in price in just two years, a much larger jump than the overall 12.8% increase in the Bureau of Labor Statistics’ unseasonally adjusted consumer price index.
Tablets are more popular as they are easy to administer via the skimmer basket or an automatic dispenser, while granular or liquid forms of chlorine must be applied manually and are more of a stopgap measure. Other alternatives include equipment that generates chlorine from salt through electrolysis and ultraviolet light or ozone-based disinfection technology that requires limited chlorine supplements. Consumers are increasingly favoring these systems for building new pools, but they come with a higher upfront cost that can run into the thousands of dollars; this makes it a tough economic sale to existing owners. So that means many American pool owners will have to hold their noses on higher prices or plan for a summer when their backyard pool looks more like a swamp.
“No one is happy to pay $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 know them well and it’s easy, above all.
Why are chlorine tablets so expensive? Last year there was a shortage of tablets after a fire following Hurricane Laura destroyed a Louisiana trichlor plant that was responsible for a significant portion of production for the US market, just as the pandemic boom in home improvement spending has sparked a wave of new swimming pool construction. Leslie had to limit her purchases of chlorine tablets to one bucket per customer. These supply issues have not gone away, and pool product retailers are also grappling with shortages of automated equipment that relies on semiconductors. But businesses are better prepared this year with alternative sourcing plans and aren’t as concerned about bare shelves. “From a component and general supply chain perspective, we’re seeing everything get longer – things that used to take three months are now taking six months,” Leslie’s merchandising director Moyo LaBode said in an interview. “We have definitely taken the lead. 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 would be on track to reopen the plant by the end of the summer, which theoretically will help. But the biggest problem is the domestic supply of chlorine, one of the three main ingredients in popular trichlor tablets along with caustic soda and urea. Olin Corp., the world’s largest producer of chlor-alkali, cut production capacity at plants in McIntosh, Alabama; Freeport, TX; and Plaquemine, Louisiana, in an effort to move away from higher-cost, low-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 of higher value than pool tablets. Between rising demand for PVC and reduced production, the amount of North American-sourced chlorine available to U.S. trichlor makers has fallen by about 20%, Leslie’s Egeck said on the earnings call. company earlier this month. The resulting pressure on commodity prices “is going to be a change that will last in perpetuity because there are no new installations online,” LaBode said.
Imported chlorine can help fill some of the gap, but is more expensive due to additional shipping and handling costs and the drag of tariffs and anti-dumping duties, in some cases. Meanwhile, the cost of urea – another key ingredient in trichlor tablets – has quadrupled over the past year due to the impact of the Russian invasion of Ukraine on exports from these two major producers of a product primarily used as fertilizer, Leslie said in a presentation. . “Given these challenging supply dynamics and still robust demand, we believe the cost of trichlor and the retail price of chlorine tablets are very unlikely to decline in 2023,” Egeck said during of the call for results.
Even with inflation, Leslie’s is not yet seeing a decline in demand for chlorine tablets – in part because of the aforementioned swamp problem if customers try to go without them. Swimming pool construction also continues to grow, according to equipment makers Hayward Holdings Inc. and Pentair Plc. According to figures from Hayward, 117,000 new in-ground pools were built in the United States last year, up from 78,000 in 2019, but below the pre-financial crisis annual trend line of 153,000. The only area where Leslie’s experienced a slight slowdown in more discretionary accessories, such as pool floats and patio furniture. Something to think about as investors head into Memorial Day weekend, which unofficially kicks off summer in the United States, and try to figure out what exactly is going on with the American consumer.