Focus Report on Guargum
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Focus Report on Guargum

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The shale gas industry, which is expanding in the US and China, uses the gum in fracking—a process where a mixture of water (95 per cent), sand (4.5 per cent) and guar gum (0.5 per cent) is......

The shale gas industry, which is expanding in the US and China, uses the gum in fracking—a process where a mixture of water (95 per cent), sand (4.5 per cent) and guar gum (0.5 per cent) is injected under high pressure into an oil-or gas-bearing rock to fracture it. The gum’s viscous property decreases fluid loss and friction, thereby reducing energy consumption and increasing gas or oil recovery. Even 0.001 to 0.05 per cent of guar gum can reduce friction by 20 to 70 per cent.
Guar gum is an extract of the guar bean, where it acts as a food and water store. The guar bean is principally grown in India and Pakistan, with smaller crops grown in the U.S., Australia, China, and Africa. The drought-resistant guar bean can be eaten as a green bean, fed to cattle, or used in green manure. The guar seeds are dehusked, milled and screened to obtain the guar gum. It is typically produced as a free-flowing, pale, off-white colored, coarse to fine ground powder. Indeed Guar is vegetable, India is native of guar or cluster bean where it is used as a vegetable. For hundreds of years Guar has been used as vegetable in India. It is also used as a cattle food, and as a green manure crop in agriculture.

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  • 1. 1 Focus Report On Guargum Prepared By: Birender Kumar Sr. Business Analyst Logicsoft International Pvt. Ltd. Logicsoft International Private Limited 28, 3rd Floor, Jia Sarai, Hauz Khas, New Delhi - 110016, India Tel. +91-11-64623381/82 Fax +91-11-26851219 Website: http://www.lsipl.com
  • 2. 2 Content Introduction Production All-India Area, Production and Yield of Guarseed Area, Production and Yield of Guarseed in Rajastan International Trade of Guargum Global Trade Analytical Report on Guargum (Table) India’s Share as Guargum Export Price Trend of Guargum Fact Sheet Import Tariff of Guargum by Major Importing Countries (Table) India’s Strategy on Guargum
  • 3. 3 Guargum Introduction The shale gas industry, which is expanding in the US and China, uses the gum in fracking—a process where a mixture of water (95 per cent), sand (4.5 per cent) and guar gum (0.5 per cent) is injected under high pressure into an oil-or gas-bearing rock to fracture it. The gum’s viscous property decreases fluid loss and friction, thereby reducing energy consumption and increasing gas or oil recovery. Even 0.001 to 0.05 per cent of guar gum can reduce friction by 20 to 70 per cent. Guar gum is an extract of the guar bean, where it acts as a food and water store. The guar bean is principally grown in India and Pakistan, with smaller crops grown in the U.S., Australia, China, and Africa. The drought-resistant guar bean can be eaten as a green bean, fed to cattle, or used in green manure. The guar seeds are dehusked, milled and screened to obtain the guar gum. It is typically produced as a free-flowing, pale, off-white colored, coarse to fine ground powder. Indeed Guar is vegetable, India is native of guar or cluster bean where it is used as a vegetable. For hundreds of years Guar has been used as vegetable in India. It is also used as a cattle food, and as a green manure crop in agriculture. Guar is a rain-fed crop, it takes 14 weeks to grow and requires reasonably warm weather and moderate rainfall. It is sown in July-August and harvested in October-November. Being a leguminous crop, guar fixes nitrogen, making the soil fertile. If a farmer grows wheat on the same land, productivity is likely to increase by 30 per cent. The production list of guar is dominated by India as a leading producer of this crop. The consumption pattern of guar seeds is largely influenced by the demands from the petroleum industry. In petroleum Industry guargum is used in processed form, which is available in three form: Guar Seeds Splits/ Gum (27-29%) Husk/ Germ (70) Wastage (2-3%) Powder Guar Meal
  • 4. 4 Production: India accounts for 90 per cent of the world’s guar produce, of which 72 per cent comes from Rajasthan. In 2011, the acreage under guar in the country was 3.2 million hectares (ha), of which Rajasthan accounted for 3 million ha. Guar was traditionally used to feed animals and is eaten as a vegetable. But it is the export of the gum made from the seed that is making farmers rich. About 90 per cent of guar gum processed in India is exported. This gum, which is actually in powder form, is made by grinding guar seeds and has unique thickening, emulsifying and binding properties. One tonne of guar makes 300 kg of gum. It is used in food, paper and textile industries. But most of the demand for the gum is due to the expansion of the shale gas and oil industries. Ninety per cent of the export is used to extract oil and shale gas—a natural gas trapped in shale formations. Seeing the profits, Haryana, Punjab and Gujarat have increased their acreage under guar. Andhra Pradesh, Karnataka and Chhattisgarh will soon start growing it for the first time. ―Its countrywide acreage is expected to rise from three million hectares (ha) to four million ha this yea India produces 600000 lakh tons of guar annually i.e. the maximum level of production in the world. It contributes to around 80% share in the world’s total production. The major producing regions of this crop in India are Rajestan, Gujarat, Haryana, Punjab, Uttar Pradesh, Madhya Pradesh, Tamil Nadu, Maharastra, Karnatka and Andhra Pradesh The average production of guar seed in India is 10-15 lakh tonnes and it fluctuates largely based on rainfall pattern. Like the year 2002-03 was marked by a low production to the tune of mere 2,00,000 tonnes due to severe drought, whereas in 2003-04 the production climbed to astronomical high levels of 15 lakh tones on increased acreage and good rainfall. The total annual production for the year 2006-07 was around 11.70 lakh tones, which has increase to 19.35 lakh tones during 2008-09. The guar seed production is expected to remain almost steady in the range of 16-18 lakh tones in 2010-11 as increased production in Rajasthan with 1546.47 tonnes. All-India Area, Production and Yield of Guarseed Area - '000 Hectares; Production in '000' tonnes; yield-Kg/Hectare Year Area Production Yield 2000-01 3497.40 658.80 188.37 2001-02 2903.10 1089.90 375.43 2002-03 975.10 199.20 204.29 2003-04 2854.00 1513.40 530.27 2004-05 2867.40 903.30 315.02 2005-06 2955.50 1059.00 358.32 2006-07 3343.70 1169.30 349.70 2007-08 3472.60 1788.53 515.04 2008-09* 3862.50 1935.80 501.18 2009--10* 2989.60 593.10 198.00 * Provisional. Source: Directorate of Economics and Statistics, Department of Agriculture and Cooperation.
  • 5. 5 Production of guarseed in Rajasthan, the main producing area is expected to be nearly 70% of India’s total production. Shri Ganganagar, Hanumangarh and Bikaner are major producing districts of Guargum Rajasthan. Though sowing has increased in Churu district, but in Nagaur, Pali and Sirohi, sowing level has fallen as farmers are taking interest in production of castor seed and Moong instead of guarseed in the wake of better price realizations of these products. Sowing is reportedly same in Jodhpur while sowing has increased in Barhmer and Jaisalmer. Moreover, reports indicate no change in sowing levels in Alwar, Bhartpur, Jaipur, Sikar, Ajmer, Chittorgarh and Udaipur districts. Area, Production and Yield of Guarseed in Rajasthan Area in Ha., Production in '000' tonnes & Yield in Kg./Ha Year Area Production Yield 2001-02 2412.60 763.35 316.40 2002-03 556.43 27.85 50.05 2003-04 2278.35 1163.17 510.53 2004-05 1944.35 317.02 163.05 2005-06 2444.65 593.22 242.66 2006-07 2420.63 637.91 263.53 2007-08 2848.34 1243.73 436.65 2008-09 3315.73 1261.22 380.37 2009-10 2581.27 201.13 77.92 2010-11 3000.78 1546.47 515.35 Source: Krishi Department, Rajasthan Haryana and Gujarat is the second and third largest producer states of guarseed in India. Where as Punjab, MP and other states are representing minor share in Guargum Production in India 0 200 400 600 800 1000 1200 1400 1600 1800 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Produtionin'000'tonnes Production of Guar in Rajastan
  • 6. 6 International Trade of Guargum According to the data of UNCOMTRADE the world’s total export of Guargum stood at 4,87,459.29 tonnes with the worth of USD 1,666.30 million during 2011. India is the largest exporter of world with about 73% share followed by the USA, Spain, Pakistan and Italy with 5.39%, 4.49%, 4.38% and 2.41% share respectively, during the period. International Trade of Guargum Qty in MT, Value in US$ Mill Exporting Country Importing Country 2009 2010 2011 %age Share in ValueQty Value Qty Value Qty Value India All 153124.66 208.36 232036.79 383.7 372401.47 1216.76 73.02 USA All 11081.68 50.01 13841.72 62.66 17147.79 89.79 5.39 Spain All 6826.68 60.47 7962.86 70.56 8352.91 74.79 4.49 Pakistan All 18512.89 22.17 20288.28 30.21 49699.24 72.96 4.38 Italy All 4976.21 34.65 6771.01 38.8 6548.74 40.13 2.41 Germany All 9761.36 24.62 9040.56 25.52 9058.8 27.32 1.64 France All 2697.46 23.4 2746.87 20.89 2745.54 21.74 1.30 China All 1772.32 8.83 1631.31 10.08 3089.97 18.42 1.11 Denmark All 1222.40 13.73 1508.93 18.22 1438.36 16.82 1.01 Switzerland All 2280.99 12.5 2820.28 13.57 2791.66 15.55 0.93 Other Countries All 12,727.53 67.56 13,159.89 65.46 14,183.38 72.02 4.32 Total 2,24,984.18 526.3 3,11,808.50 739.67 4,87,457.86 1,666.30 100.00 Source: UNCOMTRADE 73.02 5.39 4.49 4.38 2.41 1.64 1.30 1.11 1.01 0.93 4.32 India USA Spain Pakistan Italy Germany France China Denmark Switzerland Other Countries
  • 7. 7 GlobalImportScenarioofGuarGum(HSCode:130232)fortheyear2011 QuantityinMT:ValueinUSDMill. MajorExportingCountries(%ageShareinImport) Italy(2.43) Morocco(0.43) France(5.93) Spain(1.23) Morocco(4.61) UK(3.67) Italy(8.72) Portugal(4.55) Italy(9.36) Switzerland(5.10) Spain(10.98) India's(inWorld)Rankasexporter=1Value=1216.760(USDMillion)%ageShare=73.02 Source:UNCOMTRADE Pakistan(4.38) Italy(0.58) Spain(6.94) Pakistan(4.37) Spain(4.91) Germany(3.79) Denmark(15.14) Netherlands(6.04) Spain(10.90) Germany(9.06) Pakistan(12.54) Spain(4.49) Spain(1.35) Switzerland(7.55) China(6.36) USA(24.70) Turkey(3.87) India(18.81) India(11.13) USA(15.91) USA(11.47) Germany(13.97) USA(5.39) Pakistan(2.37) Italy(8.00) India(34.43) Pakistan(24.75) Switzerland(4.19) Spain(20.43) Pakistan(11.16) Morocco(15.98) China(18.20) France(14.86) India(73.02) India(94.51) India(55.96) USA(50.90) India(30.62) India(70.71) Pakistan(21.40) Spain(60.35) India(19.94) India(40.95) India(39.58) India'sstatusasExporter India's Position 1 1 1 2 1 1 3 3 1 1 1 %ageShare inValue 0.00 94.51 55.97 34.42 30.62 70.71 18.80 11.13 19.92 40.95 39.58 Value 1216.7 6 947.64 56.63 22.20 14.23 28.53 7.33 3.35 5.54 11.25 8.87 Quantity 372401.47 264215.49 21349.31 6211.59 6430.62 16417.55 2045.31 1389.00 2286.40 4327.55 3500.53 TotalImport Value 1666.34 1002.68 101.18 64.50 46.48 40.35 38.99 30.11 27.81 27.47 22.41 Quantity 487459.25 277935.08 29486.72 16388.81 14126.38 18587.09 7160.82 5596.27 5785.09 8174.39 7322.47 ImportingCountry WorldTotalImport USA Germany Canada China Italy Japan Denmark France RussianFederation UnitedKingdom
  • 8. 8 India’s Status as Guargum Export India is the leading net exporter of guar seeds and guar gum. The country exports over 117000 tons of guar and its derivatives. The country has emerged as a major exporter of guargum with export reaching a record high of 372401.47 tonnes valued at around USD 1216.76 million in 2011. The export of guargum from India has dramatically increased during last year from USD 383.70 million in 2010 to USD 1216.72 million in 2011, representing 217% growth over the year. United States alone constitute to around 264215.49 tonnes of India’s guar and its derivatives with the worth of USD 947.64 Million, representing a share of 78%, followed by Germany and Italy with 4.65% and 2.34% respectively. Other major countries importing India’s Guar during 2011 were Canada, China, Australia, South Africa, Russia Federation and United Kingdom. India's Export of Guargum Qty in MT, Value in US$ Mill Exporting Country Importing Country 2010 2011 Yr-on-yr growth in value %age share in valueQty Value Qty Value India USA 129579.28 235.04 264215.49 947.64 303.18 77.88 India Germany 25770.6 36.16 21349.31 56.63 56.61 4.65 India Italy 9467.55 11.17 16417.55 28.53 155.42 2.34 India Canada 3086.5 5.86 6211.59 22.2 278.84 1.82 India China 7219.42 9.01 6430.62 14.23 57.94 1.17 India Australia 5029.46 6.87 4767.21 12.95 88.50 1.06 India South Africa 6220.32 7.33 6045.55 12.07 64.67 0.99 India Russian Federation 5345.42 10.51 4327.55 11.25 7.04 0.92 India United Kingdom 3807.29 5.23 3500.53 8.87 69.60 0.73 India Brazil 3436.67 4.87 3131.63 8.69 78.44 0.71 Other Countries 33,073.69 51.65 36,002.80 93.66 81.34 7.70 Total 2,32,036.20 383.7 3,72,399.83 1,216.72 217.10 100.00 Source: UNCOMTRADE 77.88 4.65 2.34 1.82 1.17 1.06 11.06 Major Importing Countries of India's Guargum USA Germany Italy Canada China Australia Other Countries
  • 9. 9 IndiaExportScenarioofGuarGum(HSCode:130232)fortheyear2011 MajorExportingCountries(%ageshareinImport) Morocco(0.43) France(5.93) UK(3.67) Spain(1.23) Morocco(4.61) Belgium(2.63) Philippines(1.45) Switzerland(5.10) Spain(10.98) Italy(5.02) Source:UNCOMTRADE Italy(0.58) Spain(6.94) Germany(3.79) Pakistan(4.37) Spain(4.91) Pakistan(3.40) Italy(2.28) Germany(9.06) Pakistan(12.54) Pakistan(7.02) Spain(1.35) Switzerland(7.55) Turkey(3.87) China(6.36) USA(24.70) Switzerland(4.05) Spain(3.32) USA(11.47) Germany(13.97) Spain(8.73) Pakistan(2.37) Italy(8.00) Switzerland(4.19) India(34.43) Pakistan(24.75) Spain(13.25) Denmark(3.88) China(18.20) France(14.86) USA(10.52) India(94.51) India(55.96) India(70.71) USA(50.90) India(30.62) India(70.92) India(83.53) India(40.95) India(39.58) India(59.77) India'sStatusasexporter India's Position 1 1 1 2 1 1 1 1 1 1 %ageShare invalue 94.51 55.97 70.71 34.42 30.62 70.92 83.36 40.95 39.58 59.77 Value 947.64 56.63 28.53 22.20 14.23 12.95 12.07 11.25 8.87 8.69 Quantity 264215.49 21349.31 16417.55 6211.59 6430.62 4767.21 6045.55 4327.55 3500.53 3131.63 TotalImport Value 1002.68 101.18 40.35 64.50 46.48 18.26 14.48 27.47 22.41 14.54 Quantity 277935.08 29486.72 18587.09 16388.81 14126.38 5698.24 6368.50 8174.39 7322.47 4206.25 ImportingCountry USA Germany Italy Canada China Australia SouthAfrica RussianFederation UK Brazil
  • 10. 10 Price Trend of Guargum The increase in export demand for guar gum — a derivative from guar seed which is used in petroleum refining, food processing and pharmaceutical industry fuelled the price rally. The Prices of guar have gained about 250 percent since last calendar year of 2011 to touch record high of about USD 6000 per ton during the month of December 2011 from low of USD 1800 per ton levels in the starting months of said period. Despite higher output in 2010- 2011, prices rose sharply due to strong export demand for guar gum and low carryover stocks from previous season. Annual Summary of International Price for Guar Gum (FOB Kandla (USD/t)) Product 2007 2008 2009 2010 2011 Indian 100 mesh 3500 cps, 1475 1480 1430 1785 6080 Indian 200 mesh 3500 cps basis 1480 1500 1450 1805 5900 Indian 200 mesh 3500 cps technical grade, 1430 1405 1355 1710 6045 Indian 200 mesh 5000 cps 1525 1485 1440 1800 6105 Indian 200 mesh 5500 cps basis 1535 1345 1306 1661 5956 Source: Agra-net(Public Ledger) In 2011-12, India exported 7.07 lakh tonnes of guar gum, 60 per cent jump in quantity over 2010-11. The prices of guargum products has shown an increase of more than 350 folds during the first six month on 2012 over the period of 2011 and shown an increase trend till the mid of the year after that it has declined from the month of July-2012 and during Nov.- 2012 price come to the level of last year. Price behaviour of Guar Gum during 2012 Price situated in FOB Kandla, Value in USD/tons Product Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Indian 100 mesh 3500 cps 10180 13380 13880 20380 20380 20380 16210 12260 8380 8050 6450 Indian 200 mesh 3500 cps basis 10000 13200 13700 20200 20200 20200 16030 12080 8000 7670 6070 Indian 200 mesh 3500 cps technical grade, 9525 12725 13225 19725 19725 19725 15555 11605 7725 7895 6295 Indian 200 mesh 5000 cps, 10205 13405 13905 20405 20405 20405 16235 12285 8405 8075 6475 Indian 200 mesh 5500 cps basis 10056 13256 13756 20256 20256 20256 16086 12136 8256 7926 6326 Source: Agra-net(Public Ledger) The reason behind the increase of price during the first six month of 2012 would be the tight supply situation of guar from India and inelastic demand in the international market. Which spurt in global demand for guar gum and seen prices hardening in India as the country is the key exporter of the guar seed, the country produces 80 per cent of the world's total guar gum output in a year. But due to the Anticipating a similar demand in the following year and eyeing higher realisations on the depreciating rupee, the domestic guar gum exporters started procuring additional quantities of the crop from the market.
  • 11. 11 0 1000 2000 3000 4000 5000 6000 7000 2007 2008 2009 2010 2011 USD/t Indian 100 mesh 3500 cps, FOB Kandla Price Trend (2007 to 2011) 0 5000 10000 15000 20000 25000 USD/t Indian 100 mesh 3500 cps, FOB Kandla Price Trend -2012 0 1000 2000 3000 4000 5000 6000 7000 2007 2008 2009 2010 2011 USD/t Indian 200 mesh 3500 cps basis, FOB Kandla Price Trend (2007 to 2011) 0 5000 10000 15000 20000 25000 USD/t Indian 200 mesh 3500cps basis, FOB Kandla Price Trend-2012 0 1000 2000 3000 4000 5000 6000 7000 2007 2008 2009 2010 2011 USD/t Indian 200 mesh 3500 cps technical grade, FOB Kandla Price Trend (2007 to 2011) 0 5000 10000 15000 20000 25000 USD/t Indian 200 mesh 3500 cps technical grade, FOB Kandla Price Trend-2012 0 1000 2000 3000 4000 5000 6000 7000 2007 2008 2009 2010 2011 USD/t Indian 200 mesh 3500 cps, FOB Kandla Price Trend (2007 to 2011) 0 5000 10000 15000 20000 25000 USD/t Indian 200 mesh 3500 cps, FOB Kandla Price Trend-2012 0 5000 10000 15000 20000 25000 USD/t Indian 200 mesh 5500 cps basis, FOB Kandla Price Trend-2012 0 1000 2000 3000 4000 5000 6000 7000 2007 2008 2009 2010 2011 USD/t Indian 200 mesh 5500 cps basis, FOB Kandla Price Trend (2007 to 2011)
  • 12. 12 After the dramatise increase of guar prices in international market, the prices shown an decline during July-2012 and the drastic price decline has created a massive trade imbalance between exporters and importers of guar derivatives in the US market. Whereas guar farmers may hold back their stocks on anticipation of better prices as seen in last year and Importers abroad had also built a massive stockpile last year, assuming an increase in prices. Importers of Indian origin based in America and other countries have started re-negotiating prices after the shipment of guar gum from India. Also, the US government has initiated working on an alternative to guar gum for its application in hydraulic fracturing – the process for extracting hydrocarbons from tight formations that have revolutionised oil and gas production. Indian exporters feel this substitution is unlikely soon and so demand would continue to pour in from foods, cosmetics, drugs, explosives, fire retardant and paper industries. Fact Sheet Guargum (HS Code – 130232) Year Production Import Export World Ranking Quantity Value Quantity Value Production Export Million Tonnes 000’ MT Rs Crore 000’ MT Rs Crore 2005-06 1.06 0.21 4.45 186.72 1049.23 1 1 2006-07 1.17 2.31 6.55 189.30 1125.79 1 1 2007-08 1.79 2.61 6.07 211.17 1125.75 1 1 2008-09 1.93 2.50 7.13 258.57 1338.99 1 1 2009-10 0.60* 3.20 11.70 218.48 1133.31 1 1 2010-11 4.24 15.55 441.61 2938.70 1 1 2011-12 5.20 19.27 707.33 16523.87 Source DAC DGCIS DGCIS DGCIS DGCIS FAO COMTRADE * Provisional Data
  • 13. 13 ImportTariffofGuargumbyMajorImportingCountries Imports DutyFree(in%) 12.5 25.5 82.7 1.7 13.4 6.8 4.6 51.3 1.7 29.1 1.4 0.9 0.3 Source:WTO Sharein%age 1.5 1.2 2 0.4 1.2 4.5 0.6 0.8 1 0.5 0.6 0.5 0.9 MFNappliedduties Max. 170 132 19 30 378 19 245 5 14 99 35 76 20 DutyFree(in%) 18.8 20.1 58.6 5.8 19.7 5.3 5.3 68.9 5.4 34.4 5.4 1.6 5.9 Average 11.5 4.9 3.5 14.8 12.3 11 17.7 1.6 9.7 9.6 9.8 29.3 5.5 FinalBoundTariff Binding(in%) 100 100 100 100 100 100 100 100 100 100 100 100 Max. 170 132 19 30 378 245 29 55 99 35 >1000 60 DutyFree(in%) 22.8 23.3 58.7 4.9 19.6 0 23.5 1 20.5 0 0 0 Average 10.4 4.8 3.5 14.9 10.1 37.4 3.7 34.1 27 33.8 53.1 45.6 Country EuropeanUnion USA Canada China Japan RussianFederation Mexico Australia Brazil SouthAfrica Argentina Thailand Indonesia
  • 14. 14 India’s Strategy on Guar Gum: Of the total farm export of India in 2011, the share of guar gum was around 19 percent. Demand for guar gum, cultivated largely in Rajasthan, has been rising ever since Western nations started using it as a controlling agent in oil wells. It facilitates easy drilling. Guar gum is extracted from guar seed. India is the world's biggest exporter of the commodity. Last year, 707,000 tonnes of guar gum were shipped. To produce one tonne of guar gum, three tonnes of guar seeds are used. In March -2012, FMC had banned futures trading in guarseed and guargum, which is largely exported for use in oil and gas industry, to curb price volatility and speculation. Now the commerce department of GoI is not in favour of re-listing of guar gum and guar seed on the forwards market despite the commodities market regulator suggesting a re-think on the ban. According to industry estimate, output is likely to rise to 2.5 million tonne in 2012-13 from 1.5 million tonne in the previous year. Spot prices have come down to about $6,500 per tonne on expectations of a bigger crop. However, due to high price realisation last year, farmers have increased acreage of guar gum and seed.