North America Frac Sand Demand Expected to Increase by 24% per Annum

HOUSTON, Oct. 1, 2014 /PRNewswire/ -- According to the 14Q2 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," says 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, 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 Northern White Sand minegate composite prices are expected to increase by 5% per annum through 2016.

In terms of closing out this year, "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," according to Samir Nangia.  He adds, "Any weather related events will only exacerbate the situation due to lack of sufficient in-play storage."

PacWest will hold a conference call on Thursday October 9, 2014 at 10:00am CST to discuss its perspectives on the North American proppant market. Call details are provided below. The call is open to the public.

Conference Call:
Dial-in: +1 (800) 830 3581  
International Dial-in: (262) 320 4698
Passcode: 2922791 

Presentation Link:
https://join.me/PacWest_Market_Update

For more information, contact Jennifer Thomas, 713.929.3285, [email protected].

SOURCE PacWest Consulting Partners