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This week’s FOB Odessa northern white spot market was assessed 10% higher from last week at $135/ton.In value terms, the theoretical value could easily be assessed $10-$12 higher based on demand. However, supply in the spot market is getting so tight that the spot market is cannibalizing its own liquidity. Specifically, we have heard reports of more idled frac crews in the Eagleford, Permian, and DJ basins due to lack of availability of sand. Moreover, in the DJ, there have been operators utilizing available and relatively inexpensive resin coated sands due to the lack of northern white making it into the basin. We think the problems in the DJ are more of a function of dwindling off-season stockpiles and not as much rail service, based on conversations with operators in the area. Some northern wet plants started back up last week and even more are expected to start up this week as mining season gets underway. Along with the new mining season comes a handful of brand new entrants to the northern white production space. It will be interesting to see how these new entrants adapt to the dynamic frac sand market. Additionally, the strain on the current sand market creates new opportunities which have brought up the topic of well redesigns. In order to continue, operations teams are taking the necessary steps to modifying well designs which will combat idle crews, cost increases, and supply availability.
This week’s FOB Odessa spot market assessment is slightly higher at $123/ton, up $3 from last week. Nothing shocking to note here as spot market supply remains at extremely low levels. Demand for 100 mesh and 40/70 is outpacing available supply thus forcing several operators to change completion designs to utilize available 30/50, which is closing the gap on a spot pricing basis. We have heard a few reports of operators in the Midland basin switching to 30/50, reluctantly, and anecdotes of screen-outs due to the adjustment in mesh size.
Last week the exchange saw continued spot buying interest, as the FOB trans-load supply remains low. The UP seems to be catching up on its West Texas service, however, the Eagleford remains relatively tight. The FOB Odessa benchmark was assessed at $120/ton, down $6 from last weeks assessment. The CN remains a problem, which still has backlogs in the Chicago area, affecting sand, grain, and other product movements through this area. The CN issued a plan last week detailing intentions to spend $500 million to increase traffic between Chicago and Winnipeg. Part of the plan includes hiring 2,000 new employees including hundreds of new conductors and bringing on additional locomotive power. Considering the tight labor market, we see this as a very aggressive yet necessary move to improve service. (See more on the CN plan) Based on conversations with miners, we should begin seeing northern white plants starting back up over the next week or two as weather permits, and an influx of much-needed sand finding its way in basin.