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Guar market update

In our last Guar Market Update sent out on 14‐Oct‐11 we had said "it has been a phenomenal year for the Guar industry. Price of a finished product such as Guar Gum 200 mesh, 5000 cps has gone up by around 250% in the last one year". However we had no inkling on what lay in store just down the road!

Guar Splits prices moved from USD 2725 per MT (1 MT = 2205 lbs) in mid‐Oct‐11 to USD 19700 per MT in mid‐Apr‐12! A further 620% rise in 6 months!Although the Guar crop for 2011 was almost as per estimates, the rise in prices was on account of two reasons as given below:


1. Continued strong demand from the hydraulic fracturing industry in USA


2. Stock piling of Guar Seeds and/or Guar Splits and/or Guar Gum powder by some companies
both in India and abroad.


The current Guar Splits price would have been higher had it not been compensated to some extent by the depreciation of the Indian Rupee, against the US Dollar, in the last few days.
At present there is significant resistance to these sky high prices. Customers from certain industries like the processed food industry have reduced their consumption of Guar Gum by either using a lower dosage level and/or partly substituting by alternatives such as Tara Gum, CMC, etc.
In certain industries where Guar Gum was being used for technical applications (non‐food) as a
binder, thickener, flocculant, etc., and where there was not going to be any impact for the end
customer/consumer, companies have replaced Guar Gum with alternatives such as Tamarind Kernel Powder, starches, etc. For some of these technical applications, Guar Gum is still the best product in terms of functionality delivery, bio‐degradability, etc; however companies have been forced to switch to alternatives due to the high prices.


As a result of the resistance, Guar Splits prices have corrected by around 10% in the last 2 days and are holding stable. We believe that customers should take advantage of this price correction and cover their immediate requirements. It is important to bear in mind that the 2012 crop is 5 months away and there is scarcity of Guar splits in the spot market.


Going forward, the Guar crop for 2012 should be the largest one ever as we expect a much larger
acreage, than that of 2011, to be brought under Guar cultivation this year. Although it is not possible to give out any estimates just yet, if the monsoon is favourable the Guar harvest will be bountiful and we trust, and hope, that prices go down from these current unviable levels.

Guar market reports are supplied courtesy of Premcem Gums Ltd.