PanXchange® Sand: Benchmarks & Analysis Sample (02.25.2019)
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While it would be premature to say that the northern white has begun a rebound, it is worth noting that the market is definitely firming led by 40/70, which has become increasingly difficult to source on a spot basis in the Permian, Eagleford, and the Northeast. Volatility in the Kermit market continues, as the market responds to last week’s huge rally with a nose dive right back to pricing seen two weeks ago in the low $20’s. We believe that the 21% increase in regional 40/70 last week was more of a knee jerk reaction to a mine over contracting 40/70, forcing buyers to the spot market. This week’s move seems to be more of a return to the ongoing big picture fundamentals and not necessarily a shift in supply and demand dynamics. Looking at the FOB Wisconsin markets, 40/70 and 30/50 continue their relative strength, while the 100 mesh market continues to languish in the low $20’s.
The Permian demand picture over the past several weeks has been dynamic, to say the least. The E&P sector is hesitant to step on the gas as upstream fundamentals continue to evolve. Given the vast amount of available HHP on the market, many operators are working on a well to well basis with spot frac crews, which is creating a very difficult situation for the pressure pumpers to manage sand positions. Adding to the planning stress is the direct sourcing trend and the fact that it is virtually impossible to know if a spot crew will be providing sand or if the operator customer will be direct sourcing. Along the same lines, regional sand suppliers are finding it increasingly difficult to manage their demand outlooks for their E&P customers. Due to the on/off nature of E&P completion programs, they do not have a consistent off-take as pressure pumpers do, therefore if a well is delayed, this often forces mines to scramble on the spot market to find a suitable buyer. It seems that as the direct sourcing trend continues, the Permian market fundamentals will continue to fluctuate and week to week volatility will persist.
On the supply side in the Eagleford, regional mines that are ramping are slightly behind schedule, forcing buyers to scramble on the spot market looking for available northern white tonnage. For the most part, railcar delays have worked themselves out; however, northern white shippers have begun to retreat from basins with regional capacity being built out, leaving both the Eagleford and Permian short on northern white volume. Interestingly, these factors in the Eagleford seem to be playing out exactly like the Permian this time last year, when slower than expected ramps combined with Midwest weather issues caused spot pricing to spike.
Looking at the northeast, there have been talks of tightening conditions over the past few weeks due to halted barge traffic caused by dangerously high water levels. While there is ample storage in the northeast, stocks are beginning to be worked through. There have been hints from operators that crews will be added in the coming weeks, which should continue to strain the supply chain, potentially offering further support to pricing.