Sand Supply: Cause for Concern?

Necessary for a majority of casting and coremaking operations, sand is a vital material for the industry. Take a closer look at various supply and demand issues that could impact the price of your metal castings.

David Jablonski, Badger Mining Corp., Berlin, Wisconsin, and Nicholas Leider, Associate Editor

(Click here to see the story as it appears in the Nov./Dec. issue of Metal Casting Design & Purchasing.)

The metalcasting industry uses an estimated 100 million tons of sand annually, including recycled and new material, to produce a majority of its castings. Whether as a basis for molds or cores, the material is a fundamental component to the industry. According to a 2014 Metal Casting Design & Purchasing survey of metalcasting facilities in the U.S., nearly 50% used a green sand casting process, (either horizonally and vertically parted) while 35% reported nobake casting capabilities. (Note: Respondents may use both.) Considering the ubiquity of sand in the metalcasting operation, issues related to supply and demand could significantly impact the industry’s ability to produce timely, cost-effective components.

Sand is used in two different ways in metalcasting: as a molding material, which forms the external shape of the cast part, and as cores, which form internal void spaces in products such as engine blocks.  With the use of binders, the sand particles will stick together and hold their shape when molten metal is poured into the mold and the casting cools.

Most metalcasting sand is high quality silica sand with uniform physical characteristics and unique engineering properties, allowing both ferrous and nonferrous metalcasting facilities to use it for molds and cores. In today’s metalcasting industry, sand typically is recycled and reused through many production cycles. Of the 100 million tons of sand in use annually, metalcasters only purchase somewhere between five and six million tons, meaning much of the supply is reused for an extended period of time.

The Recession and Fracking Boom

The recession of 2008-2009 resulted in a considerable decline in metalcasting production, leading to facilities consuming less sand. During this economic downturn, however, the oil and gas industry experienced a significant boom in fracking, thanks in part to technological advancements in horizontal drilling. Fracking, or hydraulic fracturing, is a drilling process that uses silica sand to fracture subterranean rock to release previously unavailable oil and gas reserves. Fuel suppliers pump a slurry, which includes silica sand, into wells at high pressure.

Fracking is forecast to consume approximately 60 million tons of sand a year by 2017. Prior to this recent surge in demand, the entire industrial sand market was roughly 30 million tons. The metalcasting industry is the third largest consumer of sand at roughly five million tons per year, slightly behind the consumption of glass producers.

With the fracking boom in full swing during the metalcasting industry’s recovery from the recession in 2010-2011, the sand market went through a turbulent period. When the glass and metalcasting industries exited the recession looking to increase consumption, the fracking industry already had gobbled up much of the available capacity. There was a real shortage for many metalcasters because major sand producers were running at or near capacity.

But metalcasters were able to procure the necessary sand as the production of fracking sands boomed. Suppliers who had long serviced the metalcasting industry were able to modestly increase the amount headed for metalcasters, while the total capacity of silica sand increased dramatically.

Due to a number of issues including differing technical specification, the price of sand destined for metalcasting facilities is significantly lower than sand used in fracking. Sand is a relatively insignificant cost for oil and gas producers, whereas it’s a material integral to the metalcasting industry’s ability to run smoothly. This difference in price has led some sand suppliers to focus primarily on fracking operations, but the metalcasting industry still has options in acquiring its necessary volume of sand. Also, sand destined for metalcasters is less profitable per ton, but the industry provides stability when compared to oil and gas producers.

Considering the growth in both supply and demand of fracking sand, the average price for industrial silica sand as a whole has increased substantially since 2007. Sand destined for the metalcasting industry had remained relatively stable until the shortage in 2011. According to the Bureau of Labor Statistics, the average price then jumped nearly 20%. Since that increase, the price appears to have stabilized.

Fracking sand is driven by the price of gas and oil, meaning suppliers can go from not being able to produce sand fast enough to a situation where they can’t turn off the faucets fast enough. Meanwhile, the price of castings is relatively stable. Consequently, the oil and gas market can go through two or three economic cycles for every one of other industries based on a variety of worldwide economic factors. Also, metalcasters tend to require a relatively standard amount of sand per month at a static location, while fracking demand can spike when a particular well needs a large amount of product.

Looking into Sand’s Crystal Ball

Barring significant economic unrest, the supply and pricing of metalcasting sand should remain fairly stable in the next few years, meaning metal casting end users should remain unaffected. That being said, the possibility for a crisis in metalcasters’ sand supply is not zero, though many would argue it is remote. The biggest threat would be a massive surge in demand for fracking sands, which, considering the growth in sand capacity in recent years, remains unlikely.

Predictably, the further one looks ahead, the more uncertain the market appears. Many analysts expect natural gas and oil prices to increase around the turn of the next decade, making sand for fracking a more valuable commodity. If the price difference between fracking sand and metalcasting sand becomes sizeable enough, suppliers may migrate toward the more lucrative market.

Since the advent of the fracking boom, the relationships between metalcasters and sand suppliers have grown a bit closer. Metalcasters (and their customers) can avoid problems in their sand supply by getting to know their suppliers. That way, they get a sense of the supplier’s dedication to the metalcasting market and whether it will be tempted by the fracking industry if prices reach a certain point.

Metalcasting will be around for a long time—as long as there is a need for manufacturing. Many sand suppliers understand it is a stable market that represents a decent volume of material. The number of customers for the material is healthy, so a supplier is able to diversify its customer base by dealing with the metalcasting industry.

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