Guar gum industry faces heat as US shale companies cut imports

KOLKATA: India’s guar gum industry is facing the heat as North America’s oil and drilling sector has reduced offtake of the commodity by almost half following a sharp drop in crude oil prices. The offtake started slowing down from December, but fell drastically between January and March, pulling down prices of guar gum split and guar gum powder, industry officials said.

Talking to ET, Rajesh Kedia, director at Jai Bharat Gum & Chemicals, said: “The January to March quarter hasn’t been well for the guar gum industry. Exports have dwindled by 50 per cent as North America’s oil and gas industry did not import guar gum.”

Kedia pointed out that the government has also withdrawn the 2 per cent export incentive, which has dampened the mood even further. As demand has dipped, prices have started falling for both guar gum split and guar gum powder. Price of guar gum split has fallen 40 per cent a tonne since October last year, while the price of guar gum powder has dropped 37.5 per cent.

India is a leading exporter of guar gum, commanding about 80 per cent of global production, followed by Pakistan. Guar gum is derived from guar seeds (cluster beans), a legume crop that grows in semi arid regions of Rajasthan, Gujarat and Haryana.



The gum is used by drilling companies to thicken water that is mixed with sand and pumped through shale rock cracks to extract gas. It is also used as a thickening agent in products such as ice-cream, bread, pasta, sausages and pastries. Patchy rains last year had affected guar seed production in India. Industry officials say that the country had produced 17 lakh tonne of guar seed in Kharif 2014, compared with 22 lakh tonne in Kharif 2013. Nearly 5.5 lakh tonne of guar gum were produced from 17 lakh tonne of guar seed. “If the current trend continues, then farmers might reduce guar seed production in Kharif 2015,” Kedia said. Notably, only three years ago, the prices of guar gum reached dizzying heights as US oil explorers started stocking up the material, fearing a drought in India. Prices went up to as high as $27,000 a tonne — more than Rs 16 lakh — in May 2012.