Industrial Minerals Inside Edge – 21 December 2012

By Mike O'Driscoll
Published: Friday, 21 December 2012

Solvay soda ash capacity curbed in Europe; logistics reality bites in Wisconsin

Welcome to approximately 60 seconds of reading Mike O’Driscoll’s take on this week’s news highlights in the industrial minerals world.

Soda ash not out of the woods yet

While certain quarters of the global mining investment community might well feel that 2012 is the “last of the bad years”, clearly the same feelings were not resonating in the board room of leading soda ash producer Solvay.

This week the Belgium-based group, which is also active in barite, strontium, and fluorspar, announced that it was to reign in production capacity in southern Europe and the Mediterranean citing “macroeconomic patterns” calling for “regional adjustment”.

Apparently, we have to await until mid-2013 for details of an “action plan” on this move. So either Solvay expects these regional markets to remain weak for quite some time (not a good sign), or is the company delaying its implementation for a few months to see if business picks up.

The primary market for soda ash is glass which is directly connected to construction, as well as automotive market performance, and most of Europe remains hard hit in this respect.

The good news is that eastern Europe, Middle East, and South American markets are more positive.

However, a significant item in the Solvay announcement pointed to increased pressure from new soda ash sources based on trona.

This surely must be acknowledgement of Turkey’s emergence as a major soda ash player in recent years through Eti Soda AS, shortly to be joined by its majority owner Ciner Group as it develops the vast Kazan trona deposit, formerly owned by...Rio Tinto Plc (enough said, see IM Inside Edge – 30 November 2012).

Frac sand: don’t underestimate logistics

We all know the importance of logistics: a high quality deposit means nothing if you can’t get it to market economically.

The frac sand community of the US is finding out about the hard facts of logistics life in shifting seriously large tonnages of a relatively low priced mineral from source to shale gas play.

Excellent work continues to be conducted by the Wisconsin Center for Investigative Journalism as it tracks the frac sand monster that has grown almost overnight in its back yard – there are now almost 100 permitted frac sand facilities in Wisconsin from just a handful a few years ago.

The latest WCIJ report reveals a slowdown in the state’s frac sand rush as supply starts to meet demand.

But the real killer has been the whole logistics game, with freight costs consuming well over 50% of the delivered cost per tonne of frac sand.

An amazing fact is that only 25% of Wisconsin’s operating and developing frac sand sites have direct rail access, and apparently most of the large players make up this share – ouch!

Frankly, the survivors of this boom are going to be those large players and especially those that have established alliances with key rail companies, eg. US Silica, Unimin, and Smart Sand with Canadian Pacific, while Preferred Sands operates its own train.

The smaller players and those without any logistics clout are simply going to be squeezed out or swallowed up by the majors.

Other smart moves logistics-wise include investment in storage and rail terminals (Santrol, US Silica, Halliburton) and transloading stations (Superior Sand).

Perhaps no surprise then this week to witness the unveiling of Cadre Proppants’ multi-million dollar “world’s first” Proppant-on-Demand System, with the claimed ability to move >20m lbs of frac sand within 24 hours to the Eagle Ford or Permian Basin (hear all about it at Oilfield Minerals Outlook 2013, 19-21 June 2013, Houston).

Expect more such developments to follow and look out for innovations such as portable containers specially adapted to carry frac sand and be transloaded on to all manner of freight modes – they are already starting to be used.

And while we’re on fracking, it doesn’t take some of them long.

Just a week after the UK formally gave the go-ahead for shale gas development it was reported that Exxon Mobil is in talks to acquire a stake in the Bowland shale gas project in Lancashire, north-west England. Shell, Total, and Statoil are also apparently vying for a position.

Now Sibelco is mining silica sand in Cheshire, just south of Lancashire: a vision of endless frac sand rail cars heading north past Liverpool and Manchester? Watch this space!

Meanwhile, may I offer the most merry of season’s greetings to one and all!

Mike O’Driscoll is Global Head of Research and Consultant Editor at Industrial Minerals, previously he was Editor of IM 1995-2012.

For the latest trends and developments in oilfield mineral supply and demand don’t miss Oilfield Minerals Outlook: Middle East, 21-23 January 2013, Dubai.

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