Sand is everywhere. Yet only a certain type of glass can be used to make the ultra-clear glass needed for smartphones and solar panels. It must have a silica concentration of more than 99.9%, compared to less than 80% for building material. This high-quality sand is scarce: of the approximately 50 billion tons extracted annually, less than 1% can be used for the production of ordinary glass. A small part of it is pure enough for solar panels.
As China’s leaders try to revive the country’s economy and rebalance it away from real estate, they are throwing money at manufacturing companies. The result is likely to be a surge in production, especially in sectors that Xi Jinping considers important to China’s future, such as lithium-ion batteries, electric cars and solar panels, many of which require vast amounts of sand. As a result, demand is likely to increase even further. Prices are already hovering around record highs; Last year they came to about $55 per tonne.
The market is opaque and fragmented. But Crux Investor, a data company, notes that the price of high-quality sand has risen twice as much as that of lower-quality material over the past five years, due to the expansion of green manufacturing and the growing popularity of smartphones. Prices are boosted by the fact that most Asian countries control exports to prevent environmental degradation. In America, where fine sand is mainly found in freshwater rivers, strict regulations make its extraction difficult.
Some manufacturers are now looking for alternatives. One option is to refine sand used for regular glass, which is usually 99.5% silica. The problem is that this in itself is expensive.
Miners, both legitimate and otherwise, therefore find spying an opportunity. The black market, estimated to be worth hundreds of billions of dollars a year, is likely to grow. Australia and Brazil may be best placed to benefit from the legal boom, according to Brian Leeners of Homerun Resources, a miner. Although these countries are best known for their sparkling white beaches, they also have significant reserves of industrial sand. These reserves are often further from human settlements than those elsewhere, making extraction easier. Mining companies report that until recently the price of sand was not high enough to cover shipping costs. Rising prices have changed the equation.
Neither country is within China’s sphere of influence. As such, they can help make Western supply chains more resilient. Mr Leeners points out that Brazil’s shipping lanes are also less susceptible to disruption because they avoid the drought-hit Panama Canal and the Red Sea, which is being bombarded by Houthi rebels. Other raw materials essential to the green transition, including cobalt, nickel and lithium, have seen prices rise, only to fall again as new supplies or cheaper alternatives are discovered. Once permits are obtained for extraction, high-quality sand could be the next step down this path. However, the wait will be uncomfortable for many manufacturers.■
For more expert analysis on the biggest stories in economics, finance and markets, sign up for Money Talks, our weekly subscriber-only newsletter.