Falling crude pushes guar prices down to four-year-low

Guar beans
Source: Wikicommons

The tumbling oil prices and subsequent scaling back of shale exploration in the U.S. have caused the prices of guar gum – a gelling agent added to fracking fluids – to fall considerably.

Back in September, The Hindu Business Online predicted that guar prices in 2014-15 and 2015-16 will rule high even with the production of the guar crop in the country increasing some 6 per cent annually. According to the source, prices were expected to touch $167/per 100 kg in 2015 and could rise up to $194 per 100 kg in 2020 on increasing demand from shale industry.

The reality turned to be very different.

Prices of guar seed spiralled down to nearly $68 per 100 kg in January, down by 30 per cent, from nearly $105 per 100 kg six months ago, and a far cry from its peak in March 2012 of $1457 per 100 kg.

To meet the growing demand, while crude prices were up, many Indian entrepreneurs opened warehouses in the US. Now the mountains of unsold crops exacerbate the problem.

“Earlier, it would take nearly a month or so for the consignments to reach the US. Now, almost all big vendors have local warehouses in the US which are full to capacity. This has led to saturation in demand,” Suman Jain, the owner of Vasundhara Gums & Chemicals told Business Standard.

It is estimated that out of 3.4 million tonnes (mt) of guar produced in 2014, nearly 1.5 million tonnes of the crop are lying in local warehouses, up fom 0.7 million last year at the same time, according to Ganesh Prajapat, a guar gum analyst.

As if the situation wasn’t dire enough, the guar industry has been further hit by the falling value of the Russian rouble. Russia is the third major importer of Indian guar gum after US and China. However, as the Russian currency touched the lowest point against dollar in the recent months, exports from India nearly nosedived, according to Prajapat.

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