While the Industrial markets we serve historically show stable and steady growth, the Energy markets experience dynamic cycles in demand and supply. Over the last 30 years, we have seen and managed through many downturns in oil prices. By effectively monitoring and forecasting supply and demand, Covia positions itself to adjust resources as markets fluctuate. Combined with the strength of our employees, stakeholder relationships, and commitment to Sustainable Development, our approach differentiates us as a partner of choice and helps us Deliver on Promise to our Energy and Industrial customers.
With 44 mines with 50 million tons production capacity and six coating facilities with two million tons coating capacity, Covia is among the leaders in the mineral and materials industry in both size and scale. Our Sales & Operations Planning (S&OP) team forecasts demand for Energy and Industrial markets, and leverages their cross-functional expertise to manage supply and demand dynamics across Covia.
Covia maintains a diversified product and market mix to minimize earnings volatility. We provide sand-based proppants and other solutions to the oil and gas sector and mineral-based material solutions to several Industrial markets in the US, Canada, and Mexico. We consider a range of macro factors (e.g., GDP), industry outlooks (e.g., American Foundry Society), and market indicators (e.g., housing starts) to assess variations in these markets. We manage through market cycles by leveraging several capabilities inherent in our DNA:
- Understanding what drives the market, with a strong focus on customer needs
- Driving efficiencies throughout the business
- Aligning production to the most cost-effective footprint, and leveraging our sales and operations planning process to match our capacity to meet demand
- Refining and optimizing our terminal network
- Optimizing shared logistics across all business segments to deliver the best service and lowest cost for our Energy and Industrial customers
- Retaining appropriate expertise and leadership to manage the business through market cycles
- Selectively investing to position our business for the future
- Investing in new products to continuously meet our customers’ evolving needs regardless of market conditions
In 2018, Covia commissioned eight million tons of annual nameplate capacity in West Texas and Oklahoma, positioning us to meet increasing customer demand for local sand in the Energy market. However, overall proppant supply outpaced demand, which placed considerable pricing pressure on the Energy market in the latter half of 2018. Our relationships, logistics, wide product portfolio, customer service, and product quality helped us maintain market share through these challenging conditions. We continued to strengthen trust with our customers, local market knowledge, and our forecasting capabilities by positioning employees in key Energy markets to monitor local market factors.
Our Industrial business remained stable despite some new entrants attempting to divert excess proppant capacity into this market. Once again, Covia’s strong relationships and industry expertise helped us maintain our long-term Industrial business, with the majority of our largest Industrial clients under contract.
Covia's expansion opportunities in 2019 include the Canoitas, Mexico, facility. We will invest in meeting demand in growing Industrial markets, such as container glass in Mexico. We will right size our network—ensuring we have the right product, right facility, right rail, right play, and right origin-destination pairs to efficiently meet demand.