North America frac sand demand expected to increase by 24% per annum

PacWest Consulting Partners

According to the 2Q 2014 ProppantIQ report, recently published by PacWest Consulting Partners, robust growth in frac sand demand is driving dramatic growth in the North American proppant market. Proppant demand is expected to grow by 23% per annum through 2016, driven primarily by frac sand (+24% per annum). The RCS and Ceramics markets are also expected to grow at 9% and 2% per annum, respectively. 

"We forecast strong growth in the North American market for proppant due to increasing horizontal wells and frac stages, in addition to increasing proppant volumes per stage," said Samir Nangia, PacWest principal. "However, there is considerable upside in our forecasts, due to the potential for faster-than-expected increases in proppant intensity (i.e., proppant/well and proppant/stage)."

The supply response, although lower than the actual increase in demand, is also robust at 18% growth in capacity per annum. Moderate price increases should be expected through the forecast period, due to stronger increases in demand growth than in supply growth. 

PacWest expects logistics to continue to be challenging through 2016, leading to significant price increases at the well pad. The market constraints can be attributed to shortages in railcars and in built-for-purpose frac sand truck trailers, among other factors. However, there should be improvement by 2015.

The constrained logistics are resulting in market tightness and one-off high prices for many spot market transactions; however, PacWest estimates that more than 75% of market volumes are under contract and that Northern White Sand minegate composite prices are expected to increase by 5% per annum through 2016.

In terms of closing out this year, Nangia said, “The remainder of 2014 could be challenging due to pressure on rail from a bumper agricultural harvest, low coal inventories, and increased crude by rail, chemicals and lumber shipments. Any weather-related events will only exacerbate the situation due to lack of sufficient in-play storage."

PacWest will hold a conference call, which is open to the public, on Thursday Oct. 9, at 10 a.m. CST, to discuss its perspectives on the North American proppant market. The dial-in number is 1-800-830-3581. The international dial-in number is 262-320-4698. The passcode is 2922791.


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