Building a Plan for Bulk Propane Storage

/kING/ noun
“the most important chess piece, of which each player has one, which the opponent has to checkmate in order to win”

You may be asking yourself, “What does a game of chess have to do with propane?” The same strategies that successful chess players use can also be applied to our propane businesses. Whether you are a veteran of the industry or just getting your feet wet, it’s important to plan and be prepared for the opponent to make a move you did not anticipate.

When we refer to the opponent, we don’t mean the propane company across town. In the propane industry, our opponent is supply crunches triggered by Mother Nature, driver shortages, inadequate customer storage and an unplanned employee absence.

Propane storage is often considered the “king,” as it sits at the throne of every marketer’s supply plan. Adequate storage provides flexibility and latitude to capitalize on opportunities. Storage is arguably the only chess piece you can deploy to get you through another day of deliveries until the next transport shows up or the next batch of rail cars are spotted. It is our best protection when the opponent challenges us.

The first step is to evaluate your current storage capacity versus your storage needs. The rule of thumb in our industry is for a storage tank to turn no more than 10 times per year. Simple math can help you determine if you fall short of that, and a good stretch of heavy demand can really test that theory.

One thing strong chess players do very well is make their pieces work for them. What is the best way to get your pieces working for you? In the discussions we have with companies prepared to make an investment in storage, they are sometimes limited in space at their current facility.

The conversation quickly switches to evaluating if a satellite site is right for them. The first step is determining the best location for your storage hub based on distance from various supply points. We suggest working with your software provider to help locate the best site suited for a satellite facility. Optimizing equipment to minimize loading times at your bulk plant will ensure efficiency.

Every business segment is currently impacted with driver shortages, and the propane industry is no different. Discussions about an aging workforce and how to handle retirement of these key people in our businesses have been happening for many years. That time is now seemingly sped up by various elements associated with the pandemic. We all continue to work though what this means for our businesses and the industry overall.

Fewer drivers means fewer deliveries to your bulk plant. The easy answer to fewer loads being delivered into your bulk plant is more storage.

Propane will always move to where its highest value can be attained. The best example of this is propane exports leaving the United States for countries willing to pay a higher price for the product. While we can’t control prices, we can do our best to make sure our needs are covered by combining strategies to make a powerful play.

Increasing storage is one strategy. Another is ownership of your own transport trailer. Marketers want control over more pieces on their board, and owning their own transport is another way to accomplish this.

Having your own transport in your arsenal of pieces allows you to dispatch the driver to the supply point that makes the most sense for you based on price and logistics. This guarantees you peace of mind in having control over knowing when your next transport load will arrive.

Make sure your pieces — especially the king — are safe! When making an investment in storage, safety is not an area to take shortcuts.

Last week I was talking with a marketer dealing with a propane leak, and he made a comment that stuck with me: “Yep, in this industry, it’s best if we keep a low profile and stay out of the news!”

Consult the National Fire Protection Association’s Liquified Petroleum Gas code (NFPA 58) for a complete list of requirements; but we suggest going above and beyond by fencing in the property, utilizing a gate system to enter the facility and installing a camera system, especially at remote sites.

Have you started planning your endgame strategy? Now is a great time to talk with manufacturers about pricing and availability for a storage project. Everyone is painfully aware of the supply chain disruptions and feeling the impact in our businesses and personal lives. With that in mind, many leadership teams believe they should postpone making capital purchases until things get “back to normal.” However, the world is a much different place today, and “normal is now.”

The hot topic in storage tends to be “What are steel prices going to do?” But there’s much more to the story. Even if steel prices were to make a correction, there are many other costs associated such as freight, labor, valves/fittings, land values and site preparation that are not likely to return to pre-pandemic values. Waiting for pricing to get better, lead times to improve and/or product shortages to disappear is a futile effort. Taking proactive measures now is essential to capitalizing on opportunities while protecting your business operations and finances.

Chess is a game of skill, and it takes patience to learn how to be successful. Each of us defines success for our business in different ways. After the snow melts (signifying that springtime is near) is a perfect time to deploy your pieces. Start the strategy discussion now to ensure you’re the one in position to checkmate your opponent!