Cheap China alternative hits Indian guar gum prices

KOLKATA: Guar gum prices have fallen about 10 per cent in the past one month amid intensifying competition from China. The North American oil drilling industry is relying more on slick water and friction reducer from China which is available at half the price of guar gum, exporters said.

Prices of guar gum, which is used in shale gas fracking, have fallen even as oil drilling has increased in North America as crude oil prices have shot up.

Guar gum powder has unique binding, thickening and emulsifying qualities, which make it suitable for fracking. “But alternative fracking agents such as slick water and friction reducer from China are posing stiff competition to Indian guar gum,” said PK Hissaria, managing director, Sunita Hydrocolloids. He said guar gum prices had dropped about 10 per cent in a month to Rs 80-82 per kg in the physical market.

Competition from Chinese fracking agents comes at a time when the United States has stepped up its oil rigging activities. According to agency reports, US energy companies added oil rigs for a fifth week in a row as they follow through on plans to spend more on drilling this year, with higher crude oil prices boosting their profits and pushing nationwide production to record highs.

Drillers added nine oil rigs in the week to May 4, increasing the total count to 834, the highest level since March 2015, General Electric Company’s energy services firm Baker Hughes said last week.

Hissaria said India exported about 4.4 lakh metric tonnes of guar gum in 2017-18. “This may go up 10 per cent in the current fiscal. It all depends on how export markets behave in the coming months,” he said.

On Tuesday, guar gum prices fell Rs 39 to Rs 8,408 per quintal in futures trading as investors liquidated their holdings in line with the downbeat sentiment amid muted export demand.

Ritesh Kumar Sahu, an analyst with Angel Commodities Broking, said that Rajasthan, India’s top guar producing state, was aiming to produce 17.5 lakh tonnes of guar seed in 2018-19 (July-June), up about 40 per cent from the previous year.

“Guar may trade lower mainly due to higher stocks and diminishing exports demand at higher prices. However, guar prices may get support if there is any improvement in guar gum exports in May and June as the US is expected to increase its oil and shale gas drilling operations following the surge in crude oil prices,” he said.