There is Big Silica Sand Demand In The World — The Next ‘Lithium’?

There is Big Silica Sand Demand In The World — The Next ‘Lithium’?

Dear Reader,

Yesterday I left you with the notion that glass (of all things) is ubiquitous, useful and unappreciated.

But it’s also a growth industry. It could be the reason for Australia’s next export industry. Why so?

One reason is the continuing explosion in mobile phones, TVs and windshields. All the time these are getting thinner, more durable and flexible.

Then comes the big uplift coming from a new source: the explosion of solar panels all over the world.

‘Yep, all good’, I hear you mutter, ‘But why do I care?’.

Because the key ingredient in glass is something called silica sand.

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Believe it or not, there’s a massive market for this innocuous material. It’s the most used substance in the world after air and water.

Now here’s the catch. Sand is like iron ore. It comes in different grades and buyers will pay more for the good stuff.

Basic sand is used for concrete. Then the next level is for flat glass. Then higher again is specialty glass. The very best goes into silicon chips that power the modern world.

Yep. There’s sand in your iPhone and computer. Modern life is built on the stuff.

Consider the average house uses an estimated 200 tonnes of it.

A hospital: 3,000 tonnes. Each kilometre of highway: 30,000 tonnes. And a large structure such as a power plant around 12 million tonnes.

And whilst the world is full of deserts and beaches, it’s no good! Desert sand is too wind-beaten and rounded. Only a certain type of sand can currently be used for construction. That’s silica sand!

The Demand for Silica Sand

This all sounds rather benign too until you get into the nitty-gritty. Sand mining all over the world has led to environmental destruction and organised crime.

Sand supplies are big but so is the demand.

Think of all those skyscrapers going up in the Middle East and Asia.

Think of Singapore, Dubai and China creating land from the sea for either high-class ‘condos’ or military bases in the South China Sea.

This roaring demand, in the grand sweep of history, is relatively new. Concrete only began to be used widely in the US after the massive San Francisco fire in 1907.

And infrastructure across China and Asia began exploding about 20 years ago.

Put this in context of today’s world too: governments are becoming ever conscious of environmental considerations…and so are investors.

Banks are shunning thermal coal. Big investors like Blackrock are demanding their firms produce credible ways to reduce emissions.

What does this mean? Australia has an opportunity to cater to the demand for silica sand in an environmentally considerate way.

Why haven’t we seen this emerge in Australia before? Two main reasons, as far as I can tell.

One is that much silica sand mining is done illegally or gouged from ‘free’ sources like riverbeds and the ocean. However, the destruction and reduction from all this is beginning to become acute.

The second is that shipping costs from most parts of Australia weren’t economical until the recent price rise for silica sand.

Now it is, and it seems unlikely to fall back anytime soon.

All this reminds me of the original lithium boom back in 2015 a bit. Back then lithium was obscure and never been in great demand on a world scale.

But the electric car narrative and the spiking lithium price sent some of the stocks up hundreds of percent.

Could the same happen to silica sand plays? It’s possible, though I don’t think it’s likely in the next couple of quarters.

But forewarned is forearmed. There are several plays related to silica sand to put on your watchlist: Several worth following are VRX Silica Ltd [ASX:VRX], Perpetual Resources Ltd [ASX:PEC] and Diatreme Resources Ltd [ASX:DRX].

I’m not saying buy them. But you can follow their announcements and developments to give you an idea of what’s happening with this sector.

Construction is booming in parts of Asia currently and there’s little reason to think it’s going to slow down anytime soon.

You might also like to pick up a copy of Vince Beiser’s book The World in a Grain.

It’s a fascinating account of how prevalent silica sand is throughout the modern world.

I mention all this for another reason. Australia is going to have more silica sand exports in the future than less. The same is true for another commodity called potash.

Five years ago you couldn’t say this with confidence. It’s a reminder that the world and opportunities in the market are never fixed.

There’s going to be a heap of profitable opportunities over the next five years. Be ready for when they appear!

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia

PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.