Investing in Sand

Investing in sand is not as easy as investing in other commodities. Even though, in total, between 15 to 20 tonnes of sand are used world-wide every year, there are hardly any investing options for sand. Other commodities are traded globally using future contracts and other financial instruments. The lack of a global sand market is due to its high weight compared to its cost which makes moving and failing rather expensive. Therefore, in order to benefit from sand as a commodity, it is more promising to invest in companies that produce sand or are part of the sand supply chain, eg cement or fracking sand producers. Possible investments in this field might be US Silica Holdings, Vulcan Materials Company, Martin Marietta Materials, Fairmount Santrol Holdings, and Cemex.

As outlined above, sand has a record of rising prices around the globe. Also, as urbanization is predicted to be a major trend of this century, demand will rise in the next years even more. Additionally, substitutes for sand are in general more expensive than sand and thus, sand seems to be a secure investment. However, there is the threat that regulators might draft stricter rules on extraction or sand which might then lead to higher production costs. All in all, sand has the potential to become the commodity of the 21st¬†century. However, as of now, investors have to be more creative if they want to invest in sand as a commodity. Also, it is a questionable whether there will be a global sand market like other commodities’ markets. These days, sand is simply too heavy to be transported for a reasonable price.

 

Risk Magazine