Fracking Makes Sand The New Hot Commodity: What You Need To Know

September 03, 2014

 

A Growth Market – And Some!

In 2010, Wisconsin could boast only five sand mines and five processing plants. By the end of 2013, it was estimated that 100 sand mines, loading and processing facilities had received permits.

On a countrywide basis, in third quarter 2013, PacWest expected "…US land proppant consumption for well stimulation to increase from 51 billion pounds in 2011 to 83 billion pounds in 2015, equal to an 12.9 percent compound annual growth rate," with sand accounting for "most of the growth in market demand" and proppant consumption to grow at 9 percent per annum between 2013 and 2015.

Not even a full year later, The Wall Street Journal was reporting that "[f]rackers are expected to use nearly 95 billion pounds of sand this year, up nearly 30 percent from 2013 and up 50% from forecasts made by energy-consulting firm PacWest Consulting Partners a year ago."

But even these figures may underestimate the size of the market that PropTester in an update back in June, to its 2013 proppant market report, noted:

"North America, which consumes a vast majority of proppant worldwide, experienced robust activity during the first two quarters of 2014. Despite significant weather related issues during 1Q 2014, demand is trending over 25 percent of annualized 2013 demand and well over 50 percent in select regions. Increases of 30 percent or more in base proppant demand are now expected through the remainder of 2014 in North America (as compared to 2013 annualized demand)."

Its 2013 Proppant Market Report indicated "the proppant market exceeded 45 million tons (90 billion pounds) in 2013, a 28 percent increase compared to 2012."

One reason projected consumption has been jacked up significantly is the discovery that if more sand is used, output rises. And according to energy analysts at RBC Capital Markets (quoted in the same WSJ piece), while "[a]bout a fifth of onshore wells are now being fracked with extra sand, …the technique could expand to 80 percent of all shale wells."

As consumption has increased, so too have sand prices. Back in 2008, most types of industrial silica sand cost an average of $30.82 per ton. By 2012, the price of such sand was an average of $44.78 per ton, with high-quality frac sand costing as much as $55 per ton.

In 2013, the price of this high-quality sand rose to an average of average of $75 per metric ton. According to another article in The Wall Street Journal, having already risen this year, "Laura Fulton, chief financial officer of Hi-Crush Partners L.P., is predicting another 5 percent to 10 percent increase in sand prices before year's end."

 

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