IM Prices 2015

By Laura Syrett
Published: Thursday, 28 May 2015

Low well completion rates hit frac sand volumes, oil prices still down 50% on June 2014 and fire sales slash cost of ceramic proppants. In Bentonite meanwhile, producers are standing firm over offers. A diverse application base shields industry, while cat litter is now clay’s main market driver.

Soft oil price topples frac sand values

Prices for hydraulic fracturing (fracking)-grade silica sand (frac sand) are tumbling in the wake of the pullback in oil drilling activity, as proppants look set to be hardest hit of all oilfield minerals.

North American sources recently told IM that frac sand producers are suffering from falling prices in the spot market.

"Frac sand is particularly hard hit right now (…) a lot of current drilled wells are not being completed," one source said.

In the US, a large number of wells that have already been drilled are yet to be fracked, as oil and gas companies hold off in the face of low oil prices. These are currently around $60/barrel (bbl), down from a peak of $120/bbl in June last year, but up from the $45/bbl low point seen in January 2015.

Frac sand prices had shown some resilience to the declining oil price, thanks partly to long term contracts that locked in selling values and meant there was less material on the spot market.

The mineral also benefitted to some degree from increased proppant loading and the shunning of more expensive resin-coated or ceramic proppants by oilfield companies, who opted for cheaper frac sand when lower hydrocarbons prices began to put pressure on margins.

Recently, the oilfield trading website, DownHoleTrader, said that ceramic proppant suppliers were having fire sales in order to shift products at prices close to those of frac sand.

"There may soon be a trend of buyers pursuing ceramics offered in fire sales," DownHoleTrader said. "Securing ceramics under market value (in some cases closer to sand prices) could provide significant value for drillers."

Ceramic proppants, typically made from sintered bauxite or kaolin, are usually more expensive than frac sand but offer more efficient oil and gas extraction in deeper wells.

Northern White frac sand, one of the best quality frac sands available in the US market, is currently priced at $65-75/s.ton on internet trading boards.

"Since the high production life of an unconventional is relatively short, I expect frac sand demand will bounce back in the fourth quarter or so, but probably not at the levels seen last year," a source said.

Bentonite prices expected to ride out oil price storm

Bentonite producers are continuing to stand firm on pricing, despite repeated requests for discounts from oilfield customers, industry participants told IM in May.

Prices for the smectite clay, which is used in oil well drilling, iron ore pelletisation (IOP), cat litter and a range of other end-markets, remain within IM’s published ranges as suppliers refuse to budge over offers. 

Market sources said that they expect the bentonite market to ride out the present volatility
in the oil market, which has seen the price of oil halve in the last 12 months.

"The oilfield [market] has always been cyclical and the minerals side always seems to ride out the storm," one North American source told IM.

Part of the reason for bentonite’s resilience is its relatively diverse application base, compared with other oilfield minerals like frac sand and barite (barytes), where almost all production goes into the oilfield market.

"On the bentonite end, oilfield usage is not the business driver it once was. Now it is cat litter," the source said. 

Producers of sodium-based bentonite in southeast Europe also told IM that prices were stable and unlikely to weaken.

"We only produce high quality material, so we have very little flexibility on price," said one supplier, whose customers number oilfield and speciality organoclay producers in the Middle East and North Africa and northwest Europe.

Last month, one buyer told
IM that although it did not expect bentonite to become cheaper this year, sales volumes could come down in the oilfield market, which may put pressure on prices for API grades.

"Contrary to buyers’ beliefs (...) there is much blood left to squeeze from [the] bentonite turnip," one source said. "It is not and never has been a business blessed with tremendous profitability. This particularly true for Wyoming bentonite."

Bentonite, API grade, bagged, rail car, ex-works, Wyoming, $/s.ton

Prices  

Bentonite, cat litter grade 1-5mm, bulk, FOB main European port, tonne €42-60 

Bentonite, cat litter grade, crushed, dried and loose in bulk, FOB Kandla, India, tonne $32-35 

Bentonite, rail hopper cars, crude, bulk (all grades), ex-works Wyoming, US, s.ton $70-150 

Bentonite, IOP grade, crude, bulk, ex-works Wyoming, s.ton $68-72

Bentonite, Indian, FOB Kandla, crushed and dried, loose in bulk, Civil Engineering grade, tonne $35-45 

Bentonite, Indian, FOB Kandla, crushed and dried, loose in bulk, Iron ore pelletising grade, tonne $36-39 

Bentonite, cat litter grade, ex-works Wyoming, US, s.ton $52-65 

Bentonite OCMA/Foundry grades crude and dried, bulk, FOB Milos, tonne €60-80 

Bentonite, foundry grade, bagged, rail cars, ex-works Wyoming, s.ton $97-124 

Bentonite, API grade, bagged, rail car, ex-works, Wyoming, s.ton $95-135



IM’s full price listing will now only be published online at www.indmin.com/PricingDatabase. If you have any comments or concerns, or wish to discuss any of the grades or prices listed, please contact Laura Syrett, Prices Editor, at lsyrett@indmin.com.

Bold indicates a price change from the previous month (it may have changed more than once during the month). All prices are listed in US$ and quoted per tonne unless indicated.