Hello all

It has been quite a while since our last Guar Market Update! The price movement for Guar splits from the beginning of 2015 is depicted in the chart below.

As the North American Rotary Rig Count declined steeply from the beginning of Jan-15, Guar splits prices followed. There was a brief respite for Guar Splits prices when Brent Crude climbed back up to $66.16 a barrel.

However now with:

• Brent Crude having fallen again to nearly $50 as of today (6-Aug)
• Good rainfall in all Guar growing areas of India
• Expectation of a good Guar crop for 2015 and
• Very little demand of Guar Gum from the fracking industry

Guar splits prices have again declined to levels last seen in March this year.

Some arrivals from the new Guar crop should begin by the second half of Oct-15 and if there has been no pickup in demand from the fracking industry by that time, Guar prices will decline further.

We have ready stock of Fast Hydrating Guar in Houston and would be glad to service any spot requirements from the fracking industry.

Hello everyone

In our last Guar Market Update on 19-Dec-14 (https://www.premcemgums.com/guar-splits-prices-at-a-4-year-low/) we had mentioned that Guar Splits prices were at a 4 year low. Since then Guar Splits prices have gone down nearly another 14% in Indian Rupee terms! The fall in USD terms has been slightly less (around 11.5%) as the Indian Rupee has appreciated against the USD in the same period. See the graph below for a visual depiction.

In the same period Crude Oil (NYMEX) dropped from $57.48/barrel to $44.53/barrel (29-Jan-15) – a drop of nearly 13% and more or less equal to the drop in the price of Guar Splits!

As is apparent the current price of Guar Splits, and hence Guar Gum, is being primarily driven by the movement of the crude oil prices. The general consensus among various stake holders in the Guar industry is that fracking activity will certainly be severely impacted in 2015 on account of the low crude prices, and which in turn will adversely impact the demand for Fast Hydrating Guar.

According to the Baker Hughes Inc Weekly Rig Count report, “U.S. Rig Count is down 90 rigs from last week to 1543, with oil rigs down 94 to 1223, gas rigs up 3 to 319, and miscellaneous rigs up 1 to 1.”. This is the lowest the count has been since August 2010.

Just like so many analysts who were caught completely off-guard by the sudden and extreme decline in crude oil prices over the last 3 months, we too were caught  on the wrong foot. We did not see crude oil prices dropping to such low levels and so could not predict correctly that Guar prices would follow in tandem. We do not have a view on crude oil prices and hence we are unsure if Guar Splits prices will go any lower; so we would advise that buyers may consider covering only for their immediate requirements at this time.

Regards

Premal Joisher

Hello everyone

Guar Splits prices are at nearly a 4 year low! Current prices for Guar Splits are US$ 0.84/lb or US$ 1846/mt; the last time prices were at this level in US$ terms was in Mar-2011. Please see the graph below to get a better perspective.

Reasons behind this recent decline in prices are given below:

1. Firstly we are at that time of the year when arrivals from the new Guar crop are at their peak

2. Secondly, and more importantly, the price for crude oil has fallen by more than 50% since June, when it was US$ 115 a barrel. It is nearly US$ 55 a barrel today. OPEC, which controls nearly 40% of the world market, met in Vienna on 27-Nov-14 but failed to reach agreement on production curbs, sending the price tumbling. As mentioned by The Economist in its article on 8-Dec-14:

“Four things are now affecting the picture. Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels. Second, turmoil in Iraq and Libya—two big oil producers with nearly 4m barrels a day combined—has not affected their output. The market is more sanguine about geopolitical risk. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. Finally, the Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground. The main effect of this is on the riskiest and most vulnerable bits of the oil industry. These include American frackers who have borrowed heavily on the expectation of continuing high prices.”

There is now serious concern in the Indian Guar Market that fracking activity might be severely impacted next year on account of the low crude oil prices and that in turn will adversely affect demand for Fast Hydrating Guar. And hence Guar Seed and Splits prices too have tumbled in tandem with the crude oil prices.

3. Thirdly on account of a lot of buyers being away on holiday at the end of the year Guar prices traditionally decline in December

We believe that Guar Splits prices are now quite close to the “bottom” for this year. Do let us know if you would like to cover any volumes at present.

Lastly we would like to wish you all a Merry Christmas and a Happy New Year!!