Covia will cut its Texas sand production by 1.6 million
short tons by the end of January 2019 due to lower demand, the
company announced on November 14.
Since September, the company has said it will idle some 4.9
million short tons of capacity, in response to an oversupplied
Falling well completions have been hitting returns for frac
sand miners, pressuring sales volumes and frac sand prices.
The pace of demand growth for frac sand in the US has eased
slightly over the second half of 2018, due in part to a
shortage of logistics capacity and labor in the West Texan
Permian basin, including a shortage of pipelines to handle oil
The decline in demand coincides with a slew of new frac sand
capacity coming online, which has applied downward pressure to
Speaking to investors on November 14, Deckard estimated that
the rate of frac sand use fell from an annualized rate of 100
million short tons in June, to around 80-85 million short tons
per year by the end of the September.
Deckard has also forecast a further decline in usage for the
rest of 2018 due to seasonal factors, with end of year holidays
affecting fracking activity, moving down to an annualized rate
of 70 million short tons in the fourth quarter.
Demand is expected to recover to 105-115 million short tons
per year in 2019, with Deckard noting several customers are
planning to expand their fracking activity.
|Northern white frac sand, 20/40 mesh,
EXW Wisconsin, $/short ton
"Pipeline issues in the Permian
are likely to persist throughout 2019, but will ultimately
subside and are expected to provide an added tailwind to
Permian completions in the back half of 2019," Deckard
Yet despite recovering demand in 2019, this will not be
enough to rebalance the over-supplied frac sand market, Deckard
said, adding that it would take "additional capacity reductions
in order to rebalance."
Covia forecast that at least 15 million short tons of sand
has already been taken out of the market following the wave of
"However, we believe more [shutdowns are] likely to come as
today’s pricing has reached unsustainable levels
for the market," Deckard said.
On September 20 this year, Fastmarkets launched a price
assessment for Northern White frac sand, 20/40 mesh, API,
ex-works Wisconsin. This price was assessed at $18-25 per
short ton on November 15, which is reportedly some 50% below
levels achieved in late July.